Tax Rates 2012/13 Article Discussion

codierose

chrisbur wrote: »

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%

thanks for everyones helps :beer:

one thing i forgot to mention is my pension contributions of £40.87 per week and child care voucher scheme of £243 per month. do these make any difference to the tax im paying. again thanks for your help.

jem16

codierose wrote: »

one thing i forgot to mention is my pension contributions of £40.87 per week and child care voucher scheme of £243 per month. do these make any difference to the tax im paying. again thanks for your help.

Yes it will reduce your tax bill if these deductions are made from gross salary before tax is paid.

angel_joyce618

Hello I earned around £45000 from last year 2014-2015, my tax code K1366 cumuli my tax code on the year 2014-2015 was 783L non-cumu. This April I was shocked that I received less than I expected and now I cannot able to pay my bills on time since they took 40% off my wages and now I can't pay all my bills since I lost more or less £800 from my normal expected income every month. What will I do, I don't how to raise such huge loss of money. So this means that they will tax me 40% of all my income for the whole year from April 2015 - April 2016? I hope you can help me with this query.

50Twuncle

Why do the blind get an extra £2290 tax allowance per year ?
What about non speakers, non-smellers, non-hearers, people who don't have other "senses"
I feel sorry that some people can't see - but why have only they been selected to gain financially ?

agrinnall

50Twuncle wrote: »

Why do the blind get an extra £2290 tax allowance per year ?
What about non speakers, non-smellers, non-hearers, people who don't have other "senses"
I feel sorry that some people can't see - but why have only they been selected to gain financially ?

What does that have to do with tax rates in 2012/3? If you want to raise the question why not start a new thread? Or perhaps raise it with your MP.

James_Blonde

I've kind of asked this question elsewhere, but I suspect this thread might be the better option, particularly if I describe the situation a bit better. This is possibly a really dumb question, but I've never really received a clear answer and I've always been left even more confused after talking to HR / payroll, HMRC or to the car leasing company - and none of them can give me a complete answer so I feel like I'm playing one off against the other when all I want is a single answer.


My total compensation package is £52000. This is made up of a salary element of £40000, a benefit fund of £6000, and a pension benefit fund of £6000.


Out of my gross compensation of £52000, I pay company recommended 10% of my total benefits fund as pension (so £5200 a year). I also pay around £326 a year for life and disability cover (tax free), but also mandatory medical cover (£546 a year, which I believe is tax free but attracts NI and BIK) and also take a car (for which I'm paying around £7624 a year, tax and NI free, but again attracts BIK). So my total tax free deductions are £13697 (though I know I will pay BIK on some of these), so according to my payslip, my total gross salary is £3191.91 per month, or £38303 a year.


So firstly, what is my tax rate based on? Is it calculated on total compensation package? Or total compensation package - deductions (so my gross salary on my pay slip)? I'm pretty sure it's NOT calculated on my salary of £40K though?


When I've asked, I've been told that the tax rate is calculated after tax free deductions, but evidence in my payslip, or more relevant to my ultimate question, my P11D, suggests otherwise.


So what's my tax rate? Is it 40% because my salary (total compensation) is >£43K? Is it 20% because my salary and benefit deductions take me below £43K? Is it 40% because, whilst my salary and benefit decisions take me below £43K, the impact on my tax code of the BIK would take me into the 40% bracket?


It's also important, not just in terms of how much tax I've been charged, but also on the P11D figure for my car. Should I be charged at the 20% rate or the 40% rate?


Ultimately the reason I'm asking is that I'm either paying too much tax out of my salary on my company car, or I've misunderstood (or been misled) about how much it would ultimately cost and how it would impact my payslip. But basic baby questions first! Replies may prompt me to ask further questions of Payroll, so if you can frame them in those sorts of terms, that would be great - I need to be very clear to make sure I'm not misunderstood (and that I understand myself!)

molerat

You have not revealed your tax code, very important in the overall picture.

James_Blonde

Sorry, tax code is 191L. (That's a whole question in itself as I'm not convinced that's correct but again it could be complete lack of understanding on my part)

booksurr

James_Blonde wrote: »

Sorry, tax code is 191L. (That's a whole question in itself as I'm not convinced that's correct but again it could be complete lack of understanding on my part)

the income tax personal allowance (16/17) is £11,000. That translates to a tax code 1100

Where you receive benefits in kind and these have been reported to HMRC on the P11D form which your employer must send to them every year your tax code will be reduced by the BIK value so in your case your code has been reduced from the cash equivalent £11,000 down to £1,910. Obviously BIK is a non cash item - it is not part of the pay you see on your payslip, nonetheless it is taxable and tax must be paid on it. Maths says you have been assessed as having a BIK of £9,090 - HMRC will have sent your a "notice of coding" on which it explains how they have calculated the code. Although I accept many people have mislaid such notes or did not realise what they were when they came

if all you received was pure salary of 40,000 you would be a basic rate taxpayer, but you do not, yet get BIK on top which easily take you over the 43,000 threshold for higher rate tax so you pay 40% tax but only on the amount over 43,000 per year. If all you get was salary then 40,000 - 11,000 = 29,000 taxable and the basic rate threshold is 31,000, so you would be a basic rate taxpayer, but you are not. You get 40k salary but only 1,910 allowance, so 38,090 is taxable, meaning 7,090 would be taxed at 40%

because you are on PAYE, HMRC have used the P11D info to adjust your tax code so that the tax due on the BIK is collected as tax deducted from your cash salary

where you pay into a pension via deductions made on the face of your payslip the amount you contribute to pension is tax free, ie you get a gross salary of 40,000 but pay in 5,200 so your taxable salary is 34,800. That figure may be subject to other adjustments given your medical insurance etc, but what you need to understand is how the taxable pay figure on your payslip has been calculated, not the pure gross pay figure

someone else can work out your numbers, but at first glance there is nothing wrong in principle with you being on such a tax code.

MichelleUK

Hi James,

I have had a look at your other posts and hopefully have some figures for you to clarify your tax situation. I have ignored NI as it will only complicate things.

Your problem seems to be a misunderstanding of your salary sacrifice car. The figures on your other post, for the lease value of your car, do not quite tie in to the lease figure on this post but it should help to clarify things. You have chosen a company car with a value of £41,980 and the benefit on this car per annum is 25% (as per the lease quote in your other post). That means that you have a benefit in kind on the car of £41,980 x 25% = £10,495. The annual lease cost per the quote is £7,175.64 (although you mention it is £7,624 in this post). So, you get taxed on £10,495 car benefit (or more based on the figure in this post). This is one of the foibles of the HMRC company car tax rules - you can end up paying tax on a bigger benefit than you actually received.

Your tax situation, based on a full year would be:

Basic salary £40,000
Car salary sacrifice £7,624
Life £326
Medical £546
Pension £ 5200
Total Salary and benefits £53,696

That means that you have gone £1,696 over your package total, so to allow for this, your employer deducts it from your salary, hence the £38,304 going through your payslip as taxable.

Calculation

Taxable Salary £38,304
Car benefit £10,495
Medical benefit £546
Total Pay £49,345

Less: Tax Allowance £11,000

Taxable Pay £38,345

£32,000 @ 20% = £6,400
£6,345 @ 40% = £2,538
Total Tax £8,938

Hope that this makes things a little clearer!