Taxed 32% on extra pay?

kmb500
kmb500 Posts: 656 Forumite
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in Cutting tax
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?
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Comments

  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    kmb500 wrote: »
    I thought the tax rate is 20%.

    Tax is 20% but there's also 12% national insurance, total 32%
  • kmb500
    kmb500 Posts: 656 Forumite
    First Anniversary Name Dropper First Post
    Pennywise wrote: »
    Tax is 20% but there's also 12% national insurance, total 32%
    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
    agrinnall Posts: 23,344 Forumite
    First Post Combo Breaker
    kmb500 wrote: »
    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..

    That's because you haven't taken the value of your personal allowance into account.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    Combo Breaker First Post
    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
    BoGoF Posts: 7,101 Forumite
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    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
    kmb500 Posts: 656 Forumite
    First Anniversary Name Dropper First Post
    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
    TheCyclingProgrammer Posts: 3,702 Forumite
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    kmb500 wrote: »
    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.

    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
    worried_jim Posts: 11,631 Forumite
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    kmb500 wrote: »
    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.

    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.
  • kmb500
    kmb500 Posts: 656 Forumite
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    worried_jim wrote: »
    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.
    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
    worried_jim Posts: 11,631 Forumite
    Combo Breaker First Post
    kmb500 wrote: »
    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!

    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.
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