40% tax bracket due to overtime. Can it be reduced if i dont do overtime this yr?

jammy86

My mum is a single mum, 2 still live at home, one 15year old and one 17year old, Ive moved out. She's a nurse and her basic salary is around £32,000. She's in a lot of debt and her wages just about covers her mortgage, bills debt etc, so for things like food, clothes, school dinners etc she has to do overtime. Quite aot of the time she has to work 60-80 hours a week working 14 and half hour shifts. As a nurse you get more money doing sundays and nights so she works every weekend and alot of nights. Bearing in mind she works in a&e so its very stressful and doesn't always get a break

She got a letter this morning sayin she's going to be put in the 40% bracket. Her payslip for January showed she earned just over £36,000. The bracket for 40% is £37,401- £150,000 so after this month she must only just be over this. Apart from this being appauling because theres over £112,000 difference but yet every1 gets 40% tax what can she do?

Theres going to be no point her doing loads of overtime this year as that makes her in that bracket just by a couple of grand and will jump her tax rate by double (its 20% for under 37,401). So could she inform them that this is because of overtime which she won't be doing as much this year to get it reduced to 20% again. She phsyically can't afford to pay 40%, stop doing overtime and then wait for a tax rebate next year, she's really worried. Does anyone have any advice please???
Also why is there tax allowence for married couples but not for single parents? Doesnt seem very fair

fengirl_2

You need to explain exactly what your mother has received as HMRc would not send out a letter saying she is in the 40% tax bracket, simply because they wouldnt have access to her employers payroll records. What exactly is the number of the form she has received and what does iot say exactly?
There is not an allowance for married couples, only a personal allowance.

jammy86

I don't have the letter as my mums at work. When she's read it out it does just basically say that she will be charged 40% fro 2010-2011. It doesn't say her earnings on the letter. I'm not quering the letter as her gross will be around £38,000 which would make her in that bracket. Just is there any way to get it back to 20% if she says she wouldn't be doing as much overtime.
Thanks

RayWolfe

You do realise that the 40% tax is only paid on the amount over the personal allowance plus the standard rate? She won't start paying 40% on all her earnings. There is no benefit to working less overtime if she needs the money!

jammy86

RayWolfe wrote: »

You do realise that the 40% tax is only paid on the amount over the personal allowance plus the standard rate? She won't start paying 40% on all her earnings. There is no benefit to working less overtime if she needs the money!

Sorry no. I've never looked into tax before. I thought because she earned over 37401 this tax year she's been put in 40% tax bracket So next tax year if she didn't do as much overtime and earned around 35000 she would still get taxed 40% a month, and then get a refund for the extra she's paid then end of 2010s tax year.

Is that wrong then? I hope so

Dewi

The tax brackets in the UK are as follows:

Basic tax rate 20% - £0 - £37,400
Higher Rate 40% - Over £37,400

You are allowed to earn a certain amount without tax. This is called your personal allowance. This varies on what benefits the company offers, but it is typically £6475. So the first £6475 one earns attracts 0% tax. Income up to £37400 attracts 20% tax, and any income over that 40%. So in your mother's case, any income over and above £37400 will attract 40% tax.

So in your case, very little income will attract 40% tax. It looks like < £1000 will attract the 40% taxation level.

jammy86

Dewi wrote: »

The tax brackets in the UK are as follows:

Basic tax rate 20% - £0 - £37,400
Higher Rate 40% - Over £37,400

You are allowed to earn a certain amount without tax. This is called your personal allowance. This varies on what benefits the company offers, but it is typically £6475. So the first £6475 one earns attracts 0% tax. Income up to £37400 attracts 20% tax, and any income over that 40%. So in your mother's case, any income over and above £37400 will attract 40% tax.

So in your case, very little income will attract 40% tax. It looks like < £1000 will attract the 40% taxation level of £37400

Thanks. I think because it said 40% for 2010-2011 we thought i'd be that reguardless, then they would calculate it at the end of the tax year.

Can i ask, as the brackets are worked out on a year salary basis how do they know what to charge you when you get paid monthly? Is it what ever you get paid do they just multiply it by 12? So reguardess of the letter she got about her tax bracket, if she got paid 2,500 in april they would times it by 12 and assume her salary for that year is 30,000 and charge her 20% that month???

Thanks for any help

ninky_2

jammy86 wrote: »

Sorry no. I've never looked into tax before. I thought because she earned over 37401 this tax year she's been put in 40% tax bracket So next tax year if she didn't do as much overtime and earned around 35000 she would still get taxed 40% a month, and then get a refund for the extra she's paid then end of 2010s tax year.

Is that wrong then? I hope so

no it's not like stamp duty. she will only be taxed 40 percent on the amount she earns over 37, 400 in any tax year. so basically in your mum's case not that much.

Dewi

I'm not sure how payroll departments do it. If you are on a fixed salary then it works out pretty simple. Take the salary, minus the personal allowance then account for taxation in each band and divide by pay duration. But if your hours are variable I am not sure what happens.

I use this website to calculate "what ifs". I am not affiliated with that site. There may be tools on money saving expert that can do that calculation too, I I just don't know about them

edit: I can't post links, just google PAYE calculator

fengirl_2

I dont think we have enough information to give any further advice here. A notice of coding does not tell you what tax rates you will pay unless its code D0 which is 40%. If she has indeed been sent code D0, then the code is obviously wrong as it does not give her personal allowances. I think the OP needs to post again after s/he has seen the actual communication.

PasturesNew

I thought 40% tax started higher because it's the £6k tax free amount PLUS the £37k, so 40% tax is actually paid only when you're on £43k. The figure of £37k is only on "taxable income".