why so much tax !age related allowances etc

stagey_2

can anyone explain why so much tax is paid over the income limit of 22900 - I earn 24800 and claim my pension of 3600 - and as I'm in my 65th year claim the allowance of 9490. I have tried to use some tax calculators - but they aren't allowing me the additional allowance as I am not 65 untilmarch 2010! so unable to check it accurately - it just seems unfair to paying so much additional tax - can anyone advise on this please.
Do you think is it real that forex expert

Pumpkinface_2

I think maybe you need to elaborate with some figures as it is very hard to respond on the limited information you have provided. Why do you think you are paying too much tax? What "additional tax" are you talking about?

noh

Because your income is over the £22900 income limit your age related allowance is reduced by £1 for every £2 over that limit.

http://www.hmrc.gov.uk/incometax/personal-allow.htm#1

Use this calculator and put in your age as over 65 with gross income of £28400

You are still paying less tax than you would if 1 year younger.

jem16

stagey wrote: »

can anyone explain why so much tax is paid over the income limit of 22900 - I earn 24800 and claim my pension of 3600 - and as I'm in my 65th year claim the allowance of 9490.

As you are £5500 over the age related allowance limit you are losing £1 for every £2 over - so basically you are losing £2750 of that extra allowance. That brings you almost back down to the normal personal allowance as your allowance will only be £6740 as opposed to £9490.

it just seems unfair to paying so much additional tax - can anyone advise on this please.

Work less to reduce your taxable income to below £22,900 - otherwise you just need to accept it.

noh

I've just looked at one of your previous posts and see that your pension is a state pension.
That means you have the option of deferring that to a later date possibly after you stop working.
http://www.thepensionservice.gov.uk/pdf/spd/spd1may08.pdf
this will save you tax.
Also as you are over state retirement age you should not be paying NICs so are alot better off than someone below that age.

stagey_2

hi all - thanks foryour responses - I did put an earlier post about trying to deduce how many fewer hours I should work to get the same net income!

i am in my 65th year so my allowance is 9490 (lots of calculators don't actually recognise this for some reason) cos I'm not 65 until 23/3/2010
my government pension is 3636
I earn 24843 and work 37.5 hours per week (the contract says) and I will be working.
I have a tax code of 308T

I'd still like to try and work out how to reduce my hours but maintain the same net income - if that's possible! by reducing my salary to 22900

thanks for all your advice

stagey_2

noh wrote: »

I've just looked at one of your previous posts and see that your pension is a state pension.
That means you have the option of deferring that to a later date possibly after you stop working.
http://www.thepensionservice.gov.uk/pdf/spd/spd1may08.pdf
this will save you tax.
Also as you are over state retirement age you should not be paying NICs so are alot better off than someone below that age.

thank you - but too late came the cry - as I took my pension at 60!

dzug1

stagey wrote: »

I'd still like to try and work out how to reduce my hours but maintain the same net income - if that's possible! by reducing my salary to 22900

thanks for all your advice

You can't - your marginal rate of tax is not 100% or higher, so if you reduce your earnings, you will also reduce your net income. Possibly not by a large amount, but it will reduce

trevormax

dzug1 wrote: »

You can't - your marginal rate of tax is not 100% or higher, so if you reduce your earnings, you will also reduce your net income. Possibly not by a large amount, but it will reduce

Agree with dzug.

Another way to look at it is if you reduce your earnings by £1, you will get £2 extra personal allowances. If you are a basic rate tax payer, you will only save 40p (£2 x 20% = 40p). So you have saved 40p but lost £1 so a net loss of 60p.

If you have interest from a bank or building society, and you have a wife that does not earn much and you trust not to run off with all the money, then you can transfer your money into her bank account. This would reduce income earned by you personally (and possibly allow you to use some of your age related allowances) while not actually reducing the actual income you both get.

stagey_2

trevormax wrote: »

Agree with dzug.

Another way to look at it is if you reduce your earnings by £1, you will get £2 extra personal allowances. If you are a basic rate tax payer, you will only save 40p (£2 x 20% = 40p). So you have saved 40p but lost £1 so a net loss of 60p.

If you have interest from a bank or building society, and you have a wife that does not earn much and you trust not to run off with all the money, then you can transfer your money into her bank account. This would reduce income earned by you personally (and possibly allow you to use some of your age related allowances) while not actually reducing the actual income you both get.

ta! but I am the working wife - he self employed.

trevormax

stagey wrote: »

ta! but I am the working wife - he self employed.

Lol sorry, it's difficult to tell who is what on here with some of the names.

Do you get much bank interest? And does your husband earn much self employed? (and do you trust him not to run off with the milk lady )

If you do get a lot, and your husband doesn't earn much and you trust him, then you should consider transfering to his bank account. Also you could look into an ISA. Interest from an ISA does not count towards relevant income when calculating your age related allowances.