Basic income tax question

beer_tins

Hi,

This may sound really basic, but I can't find a definite answer, so I hope someone can help me. How much do you have to earn before you have to start paying higher rate tax on PAYE, assuming you have a normal personal allowance of £6,035 (for the year 08-09)?

The HMRC website says you pay 40% on income "over £34,800". But is that after your personal allowance is taken into account i.e. is it really £40,835?

Thanks in advance for any help.

Bean_Counter

beer_tins wrote: »

The HMRC website says you pay 40% on income "over £34,800". But is that after your personal allowance is taken into account i.e. is it really £40,835?

That is correct.

beer_tins

Great, that's what I assumed. Thanks for your help.

nomoneytoday

beer_tins wrote: »

Hi,

This may sound really basic, but I can't find a definite answer, so I hope someone can help me. How much do you have to earn before you have to start paying higher rate tax on PAYE, assuming you have a normal personal allowance of £6,035 (for the year 08-09)?

The HMRC website says you pay 40% on income "over £34,800". But is that after your personal allowance is taken into account i.e. is it really £40,835?

Thanks in advance for any help.

It's a con by the government to get extra cash IMHO !

If the higher allowance was set at £40835 then everyone would pay the same. However, if you have any benefits it lowers the standard rate so you end up paying 40% earlier.

For example if you have £1000 BUPA cover (which you pay the tax only on) your tax code would come down from 603L to 503L, and you end up paying 40% above £39835 instead of £40835

beer_tins

nomoneytoday wrote: »

It's a con by the government to get extra cash IMHO !

If the higher allowance was set at £40835 then everyone would pay the same. However, if you have any benefits it lowers the standard rate so you end up paying 40% earlier.

For example if you have £1000 BUPA cover (which you pay the tax only on) your tax code would come down from 603L to 503L, and you end up paying 40% above £39835 instead of £40835

Yes, I do have health insurance and I'd need to take the value of any added job perks into account. I don't know why they tax private health insurance either, surely it take some of the strain off of the NHS (which we all pay for anyway)?

At least I don't have a company car etc. Some people end up on a negative tax code when it's all added up :eek:

The reason I'm asking is, I've got a (very likely) new job opportunity and I'm trying to figure out how much to ask for. Am currently on £34.5K (due for review this month) and was thinking of asking for around £38K. Glad to see I wouldn't be paying higher rate tax if I were to get that, even with perks taken into account.