Tax Rates 2012/13 Article Discussion

laneybel2002

Sorry take home £220.00

devilslayer

I currently have a Pension (Military) which gives me just over £1000 after tax, which is taxed with a tax code 988L

I also work full time for a driving agency and i am taxed BR rate on my earnings (£1200 to £1800 per month, after tax, depending on hours worked / job availability etc).

My question is this..

Which of these should be taxed at BR rate and which at the 988L rate.

Is it better to have the income that provides the most cash taxed at 988L?

Currently:

Pension taxed at 988L
PAYE taxed at BR

Would it be better:

Pension taxed BR
PAYE taxed at 988L

or

Doesn't it really matter?

zygurat789

devilslayer wrote: »

Which of these should be taxed at BR rate and which at the 988L rate.

Is it better to have the income that provides the most cash taxed at 988L?

There are other reasons why one should have all your allowances and one taxed at BR.
HMRC tend to give the allowances to your main employment, so, if, for instance you were to cease to have a full time job you would benefit from all your allowances whereas if they were given against your full time job and you were, say, made redundant then you would have all the hassle of changing it around and, may, suffer, albeit temporarily, from HMRC tardyness.

codierose

hi please help
when do i exactly pay 40% tax. i am on week 45 my taxable pay is 38,987.26 , my tax code is 1000L.
normal pay is £640 but being asked to do over time i think that i am close to going over but how close ?
and do i pay from the week i go over ?:doh:
sorry for being so dumb

jem16

codierose wrote: »

hi please help
when do i exactly pay 40% tax. i am on week 45 my taxable pay is 38,987.26 , my tax code is 1000L.

40% tax starts at £41,866.

normal pay is £640 but being asked to do over time i think that i am close to going over but how close ?

A little under £3000.

and do i pay from the week i go over ?:doh:
sorry for being so dumb

Really depends on how you are paid. If your pay is variable you could end up paying some 40% tax one week/month and then getting it back again later.

I wouldn't really worry about it. You only pay 40% tax on the amount you are over the threshold - you don't start paying 40% tax on everything. If you earned £41,871 you would only pay 40% tax on £5.

Surely 60% of something is better than 0% of nothing?

malc_b

Of course if you work out that you are going to pay some 40% by the end of the year then you could always make some additional pension contributions as then the gov chips in 40%.

chrisbur

codierose wrote: »

hi please help
when do i exactly pay 40% tax. i am on week 45 my taxable pay is 38,987.26 , my tax code is 1000L.
normal pay is £640 but being asked to do over time i think that i am close to going over but how close ?
and do i pay from the week i go over ?:doh:
sorry for being so dumb

Do you mean that as at week 45 you have a taxable pay of 38987.26 or that at the tax year end (week 52)you will have a taxable pay of 38987.26. If this is your figure for week 45 then you are already paying some tax at 40%.

codierose

chrisbur wrote: »

Do you mean that as at week 45 you have a taxable pay of 38987.26 or that at the tax year end (week 52)you will have a taxable pay of 38987.26. If this is your figure for week 45 then you are already paying some tax at 40%.

currently at week 45 have a taxable pay of £38987.26
thanks for the quick replys
what i am most worried about once i have hit the 40% £41,866.They will then start taking that of my basic £640 so in final weeks 49, 50, 51, 52, for example i would loose 40% of the £640

jem16

codierose wrote: »

what i am most worried about once i have hit the 40% £41,866.They will then start taking that of my basic £640 so in final weeks 49, 50, 51, 52, for example i would loose 40% of the £640

That doesn't happen so there is no need to worry about it.

Basically each week you get 1/52nd of your tax-free allowance, 1/52nd of the 20% band, 1/52nd of the 40% tax band and so on.

With a cumulative tax code each week also looks back at the previous weeks. So in Week 49 you will get 49/52nds of your tax-free allowance, 20% and 40% band. It will then compare the tax due with the tax already paid and calculate what you are owing that month.

As chrisbur said, you will already have paid some tax at 40% in previous weeks. It doesn't wait until you hit the 40% threshold and then tax everything at 40%.

chrisbur

Tax paid to date for week 45 on 38987
Tax free allowance (45/52 of 10000) 8654
Tax due on 30333 (38987 less 8654)
20% band as at wk 45 (45/52 of 31866) = 27576
20% of 27576 = 5515
40% tax due on 30333 - 27576 = 2757 at 40% = 1102
Tax due to date is 5515 + 1102 = 6617 Or thereabouts as I have rounded figures a bit.

To some extent the increase in tax to 40% is offset by a decrease in national insurance deductions. When your weekly wage goes over 805 your NI goes down from 12% to 2% so if you combine the two your deductions go from 32% to 42%. Due to tax and NI working differently if your earnings vary from week to week so that some weeks you earn under 805 and some weeks over 805 you even have a small band where you pay 22% combined tax and NI so you then get the situation of paying 32% then 22% then 42%