Where Am I? 40%....20% In Between?

greenshirt

I hope someone could clarify a couple of points please.

My base salary is 27 per annum.

I earn commission also and last year this totalled circa 19.
Or perhaps, thinking financial year-wise anticipate 24 between 1 April '08 and end of this month.

On my base salary I'm on the lower tax band 20%. Does the commission push me into the higher band?
Or is this additional commission taxed more heavily as an addition to my base salary?
So difficult to pick out from wages slips where I am. My tax code is 306L. In August last year it was 246L. In March last year it was 241L. In March'07 it was 206L.

I've never filled out a tax return or been sent one. I phoned the tax office a few years back when in a different job where commission earnings were pushing me slightly into 40% territory (over 33k at the time? or 35k?). Tax office said I don't have to complete a form as I hadn't received one in the post...

My earnings have increased significantly in the last 12 months or so. Can anyone advise the implications of this?

Any advice greatly appreciated...

fengirl_2

If your salary is £27,000
deduct tax free 6035
Taxable 20965
20% band 34800
Balance 13835

This means that £13835 of your income after your salary is taxed at 20% with anything above that taxed at 40%. Therefore, some of your commission will be taxed at 20% and some at 40%.

The PAYE system will take care of this, but if you have any other income, eg bank or building society interest which is taxed at source at 20% you will need to complete a self assess ment in orde to pay the extra 29% tax on that income. If you have no other income apart from PAYE, you dont need to self assess.

chrisbur

On code of 306L the tax free element will be only £3065.

fengirl_2

It does not matter what the code number is - the personal allowance is always £6035, it can never be less. There must be other income in the code which effectively is taxed at 40%, or else an underpayment of tax which does not affect the rate of tax payable.
My example was trying to make it easy for greenshirt to understand.

jem16

fengirl wrote: »

My example was trying to make it easy for greenshirt to understand.

I think it's easier to understand that because of some taxable deductions or underpayment of tax, the OP's tax-free allowances have effectively been reduced from £6035 to £3065 as chrisbur states.

LittleVoice

fengirl wrote: »

The PAYE system will take care of this, but if you have any other income, eg bank or building society interest which is taxed at source at 20% you will need to complete a self assess ment in orde to pay the extra 29% tax on that income. If you have no other income apart from PAYE, you dont need to self assess.

Just to say I think that is a typo - should be extra 20% tax as the savings (other than tax free ones like ISAs) will have had 20% tax deducted. The 10% band wouldn't apply in this case any way.

Valli

fengirl wrote: »

It does not matter what the code number is - the personal allowance is always £6035, it can never be less. There must be other income in the code which effectively is taxed at 40%, or else an underpayment of tax which does not affect the rate of tax payable.
My example was trying to make it easy for greenshirt to understand.

Yes it CAN be lower - the starting point for the personal allowance is 6035 BUT it can be increased or decreased according to the notice of coding and allowances/deductions
If MY tax code were 306L though I would be checking to find out why...
So starting with the assumption that tax isn't being paid on the first £6000 (or so) will lead the OP to think s/he is paying too much tax!

greenshirt

The PAYE system will take care of this, but if you have any other income, eg bank or building society interest which is taxed at source at 20% you will need to complete a self assess ment in orde to pay the extra 29% tax on that income. If you have no other income apart from PAYE, you dont need to self assess.

Fengirl, Ty for the advice. I do have some savings but typically earn circa £50/mth with £10 already deducted for tax. Am I really obliged to declare this interest earning which is currently circa £600/annum? Implications if I don't? Many thanks again.

Valli

Just so you know Greenshirt ALL UK banks tell the Inland Revenue what interest is being earned.
You should get statement/book entries which show interest paid and tax paid on that interest.

jem16

greenshirt wrote: »

Fengirl, Ty for the advice. I do have some savings but typically earn circa £50/mth with £10 already deducted for tax. Am I really obliged to declare this interest earning which is currently circa £600/annum? Implications if I don't? Many thanks again.

As a higher rate taxpayer then yes you are obliged to declare this interest as you owe more tax on it. If you don't declare it HMRC will catch up with you and demand the back payment of tax.