Higher Tax Code Questions?

Shawn1983

Hi All,

Im currently paid £28000 a year and with a shed load of overtime im likey to earn over £40k this year, my concern is the tax i will pay on this.

I've asked people i work with but noone seems to know, some say that if i earn enough to put me in the higher tax bracket that i'll pay 40% tax for the following year? Some say that i'll just pay 40% on the amount that is over the normal tax bracket till the end of the tax year and then it would return to normal again?

So i'm confused, any help would be great.

Cheers

Shawn

00ec25

assuming you are on the standard tx code of 647?

you have to earn 6,475 +37,400 = £43,875 total during the tax year before you will pay 40% high rate. You will only pay 40% on the money earned in excess of £43,875

however, simplistically, if you earn more than 43,875 / 12 = £3,656 in any one month then you will pay 40% on the excess over that amount, in that month. If, simplistically, at the end of the year your total earnings for that year (April - April remember) are below the annual total, then you will get a tax refund

what hppened in one year does not dictate what happens the next year. If you do not earn above the limit next year, you will not pay high tax next year

CLAPTON

bear in mind ... that the 43,875 mentioned by 00ec25 is your earning after any pension deductions .... so if you e.g paid 2,000 per annum in pension then you could earn 45,875 before paying 40% tax on the excess over 45,875

also remember that at standard rates of tax you pay 20% tax plus 11% NI contributuions i.e. 33% in total
any earning at 40% tax only attract 1% NI so your total deductions are 41% .. a lot of course but compare it to 33% and not 20%.