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    • kmb500
    • By kmb500 30th Nov 17, 12:06 PM
    • 408Posts
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    kmb500
    Taxed 32% on extra pay?
    • #1
    • 30th Nov 17, 12:06 PM
    Taxed 32% on extra pay? 30th Nov 17 at 12:06 PM
    Hi,


    I earn £1821.83 per month which by my calculation is £21861.96 salary per year. I did some extra work this month and got paid £331.20 extra for it. But I got my payslip and the tax seems like a lot. I got taxed £415.56. I won't be earning anything else for the rest of the year so that would make my 2017 earnings to be £22193.16.


    I don't know normally what my tax is because I was paying £100 of my earnings on pension but I have just opted out so this is the first pay slip with no pension deduction. But judging by MSE calculator I should be paying £173 income tax and £137 national insurance. So now paying £238.80 income tax and £176.76 NI seems very high!


    I earned £331.20 extra but got taxed £105.56 more which is 31.8% tax. I thought the tax rate is 20%.


    Can anyone make sense of this?
Page 1
    • Pennywise
    • By Pennywise 30th Nov 17, 12:13 PM
    • 9,416 Posts
    • 17,117 Thanks
    Pennywise
    • #2
    • 30th Nov 17, 12:13 PM
    • #2
    • 30th Nov 17, 12:13 PM
    I thought the tax rate is 20%.
    Originally posted by kmb500
    Tax is 20% but there's also 12% national insurance, total 32%
    • kmb500
    • By kmb500 30th Nov 17, 12:31 PM
    • 408 Posts
    • 110 Thanks
    kmb500
    • #3
    • 30th Nov 17, 12:31 PM
    • #3
    • 30th Nov 17, 12:31 PM
    Tax is 20% but there's also 12% national insurance, total 32%
    Originally posted by Pennywise
    OK thanks. I'm still a bit confused though because, the tax + NI is usually 17% of my earnings. I don't really understand how this all works..
    • agrinnall
    • By agrinnall 30th Nov 17, 12:56 PM
    • 18,686 Posts
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    agrinnall
    • #4
    • 30th Nov 17, 12:56 PM
    • #4
    • 30th Nov 17, 12:56 PM
    OK thanks. I'm still a bit confused though because, the tax + NI is usually 17% of my earnings. I don't really understand how this all works..
    Originally posted by kmb500
    That's because you haven't taken the value of your personal allowance into account.
    • 00ec25
    • By 00ec25 30th Nov 17, 1:04 PM
    • 5,537 Posts
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    00ec25
    • #5
    • 30th Nov 17, 1:04 PM
    • #5
    • 30th Nov 17, 1:04 PM
    rather than explain (again) how income tax, national insurance and the personal allowance all come together to leave you with a net pay amount please read:

    https://www.moneyadviceservice.org.uk/en/articles/understanding-your-payslip

    and the links in it on how tax is deducted, eg:
    https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-deductions

    and how pension deductions impact the above
    • BoGoF
    • By BoGoF 30th Nov 17, 3:27 PM
    • 2,689 Posts
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    BoGoF
    • #6
    • 30th Nov 17, 3:27 PM
    • #6
    • 30th Nov 17, 3:27 PM
    As has been said your personal tax free allowance is used up against your regular monthly salary. Any extra work/overtime will then attract 20% tax and 12% NIC.
    • kmb500
    • By kmb500 30th Nov 17, 3:28 PM
    • 408 Posts
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    kmb500
    • #7
    • 30th Nov 17, 3:28 PM
    • #7
    • 30th Nov 17, 3:28 PM
    thanks


    I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 30th Nov 17, 3:38 PM
    • 2,901 Posts
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    TheCyclingProgrammer
    • #8
    • 30th Nov 17, 3:38 PM
    • #8
    • 30th Nov 17, 3:38 PM
    thanks


    I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.
    Originally posted by kmb500
    Compared to many other countries, UK rates of taxation aren't that high.

    https://www.theguardian.com/money/2017/may/27/tax-britons-pay-europe-australia-us
    • worried jim
    • By worried jim 30th Nov 17, 3:38 PM
    • 8,756 Posts
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    worried jim
    • #9
    • 30th Nov 17, 3:38 PM
    • #9
    • 30th Nov 17, 3:38 PM
    thanks


    I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.
    Originally posted by kmb500
    No it isnít. Just returned from the US and the pool cleaner has to pay $700 per month just for healthcare insurance. We have it so good in the UK.
    "Only two things are infinite-the universe and human stupidity, and I'm not so sure about the universe"
    Albert Einstein
    • kmb500
    • By kmb500 30th Nov 17, 3:52 PM
    • 408 Posts
    • 110 Thanks
    kmb500
    No it isn’t. Just returned from the US and the pool cleaner has to pay $700 per month just for healthcare insurance. We have it so good in the UK.
    Originally posted by worried jim
    well it just feels expensive when I am paying £600 for a room in a crappy shared house I really struggle for money. I just cancelled my pension so I can start saving some money. I'm just having a bit of a moan lol I didn't realise the tax rate, seems just to me that having 32% as the cheapest income tax rate is quite a lot in my opinion. and yeah US healthcare is awful on the other hand most stuff is a lot cheaper in America that's why you see people buying nice houses on low salaries and 15 year olds drive ford mustangs.


    I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K!
    • worried jim
    • By worried jim 30th Nov 17, 3:59 PM
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    worried jim
    I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K!
    Originally posted by kmb500
    This is true! Our 4 bed house was the same price as the 2 bed flat I live in. However, I am guessing your £600 pm room is close to London so might not be a like for like comparison.

    Why did you cancel your pension? Massive mistake, please reinstate ASAP, compounded interest will work wonders for you.
    "Only two things are infinite-the universe and human stupidity, and I'm not so sure about the universe"
    Albert Einstein
    • kmb500
    • By kmb500 30th Nov 17, 4:05 PM
    • 408 Posts
    • 110 Thanks
    kmb500
    This is true! Our 4 bed house was the same price as the 2 bed flat I live in. However, I am guessing your £600 pm room is close to London so might not be a like for like comparison.

    Why did you cancel your pension? Massive mistake, please reinstate ASAP, compounded interest will work wonders for you.
    Originally posted by worried jim
    Yeah my grandparents in America sold their huge 6 bedroom house for about £200K which is crazy.


    I live in Cambridge, would hate to live in London but it's nearly just as expensive, just feels like the world is against me. I only have GCSEs nothing else so not in a position to go for high paying jobs.


    I cancelled my pension because I was paying in over £100/month and I am struggling to put any money aside at all. So now I can put that money that would have gone to the pension, straight into a savings account. I know its worth less in the end but the pension can only be accessed in 40 years time so seems pointless.. just my opinion
    • lisyloo
    • By lisyloo 30th Nov 17, 4:05 PM
    • 21,305 Posts
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    lisyloo
    I can see that the basic tax rate is 32% that's crazy!
    I don't think it's high considering what you get (or potentially get) e.g. police, fire service, free NHS, free long term care, free care at home, free roads.

    but the pension can only be accessed in 40 years time so seems pointless.. just my opinion
    My opinion is that your opinion is wrong :-)
    Sorry :-)
    I am 49 now and hoping to retire at 58 without any high earnings.
    I was possibly lucky enough to be born at a better time but IMO the most sensible things you can do are
    1) get a mortgage
    2) contribute as much as you can to a pension which have massive tax benefits

    A mortgage might seem expensive but after 25 years you have a house !! Not rocket science, just making the payments.
    Similarly a pension grows and when you have large amounts, your pension starts earning more than you.
    I'm worth a large 6-figure sum and that's simply from doing those two things for 30 years, not from particularly high earnings, not caused by brilliant property market calls either as prices went down after I bought in 1991.
    Last edited by lisyloo; 30-11-2017 at 4:15 PM.
    • pelirocco
    • By pelirocco 30th Nov 17, 4:11 PM
    • 7,590 Posts
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    pelirocco
    well it just feels expensive when I am paying £600 for a room in a crappy shared house I really struggle for money. I just cancelled my pension so I can start saving some money. I'm just having a bit of a moan lol I didn't realise the tax rate, seems just to me that having 32% as the cheapest income tax rate is quite a lot in my opinion. and yeah US healthcare is awful on the other hand most stuff is a lot cheaper in America that's why you see people buying nice houses on low salaries and 15 year olds drive ford mustangs.


    I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K!
    Originally posted by kmb500

    Thats just the starting costs , they have plenty of other costs to add at ourchase , and then there are the annual taxes ect

    if it was cheap to buy and own proerty in the US they wouldnt have had the huge number of repossesions

    Then of course there is the cost of healthcare

    I dont think you have taken into account the tax free some you are allowed to earn before you pay taxes btw..........However you are right in the fact that we do need affordable housing , it has got out of control
    Vuja De - the feeling you'll be here later
    • BoGoF
    • By BoGoF 30th Nov 17, 4:15 PM
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    BoGoF
    The basic rate is NOT 32%
    • lisyloo
    • By lisyloo 30th Nov 17, 4:17 PM
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    lisyloo
    seems just to me that having 32% as the cheapest income tax rate is quite a lot
    The cheapest income tax rate is 0%.
    I don't disagree with what you say, but your overall tax rate would be lower as the first £11,500 is free of income tax.
    If you put it into a pension you also get the income tax back, so if you agree to save it for your retirement then the government doesn't tax you. The downside is you can't touch it until at least 55 (as it's meant to be for retirement).

    In some cases you can save employees NI, employers NI and also get a contribution from your employer.

    I would strongly advise you not to dismiss pensions without doing some research about what your employer offers as it may be VERY good.
    I get 45.8% tax relief, (32% plus 13.8% employers NI) AND my employer gives me money that I wouldn't other get (sometimes referred to as FREE money although it's not without conditions).
    Last edited by lisyloo; 30-11-2017 at 4:20 PM.
    • qwert yuiop
    • By qwert yuiop 30th Nov 17, 4:29 PM
    • 2,133 Posts
    • 1,246 Thanks
    qwert yuiop
    [QUOTE=kmb500;
    I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K![/QUOTE]

    You have to pay property tax there, which is often as much as the mortgage. If you donít pay up, they evict you.
    • kmb500
    • By kmb500 30th Nov 17, 5:13 PM
    • 408 Posts
    • 110 Thanks
    kmb500
    I don't think it's high considering what you get (or potentially get) e.g. police, fire service, free NHS, free long term care, free care at home, free roads.

    My opinion is that your opinion is wrong :-)
    Sorry :-)
    I am 49 now and hoping to retire at 58 without any high earnings.
    I was possibly lucky enough to be born at a better time but IMO the most sensible things you can do are
    1) get a mortgage
    2) contribute as much as you can to a pension which have massive tax benefits

    A mortgage might seem expensive but after 25 years you have a house !! Not rocket science, just making the payments.
    Similarly a pension grows and when you have large amounts, your pension starts earning more than you.
    I'm worth a large 6-figure sum and that's simply from doing those two things for 30 years, not from particularly high earnings, not caused by brilliant property market calls either as prices went down after I bought in 1991.
    Originally posted by lisyloo
    The cheapest income tax rate is 0%.
    I don't disagree with what you say, but your overall tax rate would be lower as the first £11,500 is free of income tax.
    If you put it into a pension you also get the income tax back, so if you agree to save it for your retirement then the government doesn't tax you. The downside is you can't touch it until at least 55 (as it's meant to be for retirement).

    In some cases you can save employees NI, employers NI and also get a contribution from your employer.

    I would strongly advise you not to dismiss pensions without doing some research about what your employer offers as it may be VERY good.
    I get 45.8% tax relief, (32% plus 13.8% employers NI) AND my employer gives me money that I wouldn't other get (sometimes referred to as FREE money although it's not without conditions).
    Originally posted by lisyloo

    The pension scheme is excellent - in the 7 months this year so far I paid in £760 and employer paid in £2250. So the total is quadruple what I put in. But like I said I can only use that money in 40 years time. If I want to save money it will be for a house, which is not something I'm going to wait until I'm 60 to buy. By the time I'm 60, I'll either be doing well for myself or I won't be. But I know for sure that I will want to save some money before I reach 60.


    If I earned more I would rejoin the pension but I've just started living on my own this year and I'm finding myself with no money, and the extra saving every month will really help me.


    Fair point about the lowest tax being 0% btw


    You have to pay property tax there, which is often as much as the mortgage. If you donít pay up, they evict you.
    Originally posted by qwert yuiop
    We have property tax here it's called council tax
    • TheCyclingProgrammer
    • By TheCyclingProgrammer 30th Nov 17, 6:09 PM
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    TheCyclingProgrammer
    We have property tax here it's called council tax
    Except it's not a property tax, it just happens to be based on the rateable value of your house. You pay council tax regardless of whether you own the property or not.
    • badmemory
    • By badmemory 30th Nov 17, 8:40 PM
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    badmemory
    I do hope that your employer continues to contribute even if you don't & they do seem to give a lot. Otherwise you are making a massive mistake. Come back in a years time & I am prepared to bet you don't have that in savings.

    If your employer doesn't contribute now then I am sure they are delighted that you have chosen to vote for a pay cut.

    Incidentally, once you are paying tax (unless you earn an lot) then for every £1 you earn you pay 20p in income tax & 12p NI.
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