40% tax help

jack290292 · 26 March 2017 at 7:40PM

Can anyone give me an idiots explanation of 40% paye tax.
I normally earn around 27K per year but due to a one off at work my salary for the end of this tax year will be around 51K. As I work and my tax is paye does this mean I pay 40% on the difference between 27 and 51k and I am guessing I will have already paid 20% so do I then pay an additional 20%.
Also will I be allowed to pay any underpayment back through paye or will I just get a hefty tax bill that would have to be paid in go.
Sorry for any daft questions but never been in this position before and never likely to be again!

Thanks in advance!

jobbingmusician · 26 March 2017 at 8:00PM

Have a look at http://www.moneysavingexpert.com/banking/tax-rates#rate

This is quite clear that you pay 40% only on the amount between (approx) £45k and your around £51k total. To quote the end of the page above:

'Marginal bands mean you only pay the specified tax rate on that portion of salary. For instance, if your salary puts you in the 40% tax bracket (over PA+£32,000 in 2016/17 and over PA+£33,500 in 2017/18), then you only pay 40% tax on the segment of earnings in that income tax band. For the lower part of your earnings, you'll still pay the appropriate 20% or 0%.'

pioneer22 · 26 March 2017 at 8:41PM

jack290292 wrote: »

Can anyone give me an idiots explanation of 40% paye tax.
I normally earn around 27K per year but due to a one off at work my salary for the end of this tax year will be around 51K. As I work and my tax is paye does this mean I pay 40% on the difference between 27 and 51k and I am guessing I will have already paid 20% so do I then pay an additional 20%.
Also will I be allowed to pay any underpayment back through paye or will I just get a hefty tax bill that would have to be paid in go.
Sorry for any daft questions but never been in this position before and never likely to be again!

Thanks in advance!

You will more than likely pay 40% on what you earn between 45k and the 51k.

You need to make sure HMRC don't move your tax code (they might assume you earn that amount all year) and assume you earn 130k a year or whatever.

anamenottaken · 27 March 2017 at 8:21PM

pioneer22 wrote: »

You will more than likely pay 40% on what you earn between 45k and the 51k.

You need to make sure HMRC don't move your tax code (they might assume you earn that amount all year) and assume you earn 130k a year or whatever.

Can you explain why HMRC might change the OP's tax code. The code is about allowances isn't it not the rate of tax due?

Only reason I could see would be if the employer had not deducted enough tax by the end of the tax year and HMRC were planning to recoup it by adjusting the tax code for the following year rather than seeking a one-off payment direct from the tax payer.

Dazed_and_confused · 27 March 2017 at 9:21PM

Pioneer22 is referring to the reduction of personal allowance when income exceeds £100,000.

Probably not an issue from what op has posted but the tax code could be changed to reduce the personal allowance if HMRC thought the op was earning over £100,000.

If the "one off work" was all paid in one week or month then it would make it look like the op's income had increased dramatically, at least in the short term.

pioneer22 · 28 March 2017 at 10:47AM

Dazed_and_confused wrote: »

Pioneer22 is referring to the reduction of personal allowance when income exceeds £100,000.

Probably not an issue from what op has posted but the tax code could be changed to reduce the personal allowance if HMRC thought the op was earning over £100,000.

If the "one off work" was all paid in one week or month then it would make it look like the op's income had increased dramatically, at least in the short term.

This happened to a few people I know in the CS who got severance packages.

40% tax help

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