Calculating tax on taxable item? 27 June 2010 at 7:21PM edited 30 November -1 at 1:00AM in Cutting Tax 7 replies 978 views

polkadot

I hope this is the right place for this?

DH has just been Tupe'd, very good all round (I think) but Im trying to work out what his take home will be?

His package is £33500 pa-but we will be going onto pruhealth, for which we pay the tax. Our monthly premium is £145 a month or £1740pa. It's my understanding that this is deducted from his personal allowance, which according to http://listentotaxman.com/index.php is £6475.
Which would leave his personal allowance at £4735.00.

listentotaxman calculates his take home at £2086 per month, but doesnt allow me to reduce the personal allowance to take the pruhealth into account?

Basically, I want to know because I want to redo our SOA and snowball calcuator-but I dont want to wait until the end of next month when we get a paysllip.

CLAPTON

a taxable benefit of 1740pa gross for a basic rate payer means extra tax of 1740 x 20% = 348 per annum or 29 per month

polkadot

CLAPTON wrote: »

a taxable benefit of 1740pa gross for a basic rate payer means extra tax of 1740 x 20% = 348 per annum or 29 per month

So we could expect his take home to be £2057.00 a month?

How do I know if he's a basic rate payer? Or is the correct question-is he a basic rate payer?

CLAPTON

You can earn 6475 and pay no tax
you are then taxed at 20% for the next 37,400
so only after earning 43,875 do you pay 40% tax

if you pay into a pension then the pension is tax free so they reduce your 'taxable' income by that amount
if you have 'benefits in kind' then they increase your taxable earnings (i.e. compmnay car, health insurance) by that amount

in your case you are in the solid 20% basic rate tax payer.

Mikeyorks

polkadot wrote: »

Which would leave his personal allowance at £4735.00.

listentotaxman calculates his take home at £2086 per month, but doesnt allow me to reduce the personal allowance to take the pruhealth into account?

His normal Code would be 647. The benefit in kind - on your figures - reduces the Code to 473 (£4735 ..... less the final digit). If you want to play around with the calculator - use that code.

(But - don't you need to adjust the benefit downwards for the fact that ... in 2010-11 ..... he will not have a full year?)

shaz77_2

When the new scheme comes into force, isn't the taxable allowance £7,475, does someone earning 1 million pounds still get this allowance?

ceeforcat

No - allowance reduced by £1 of every £2 over 100000 of earnings until zero.

On the pruhealth - has the employer considered salary sacrifice whereby the gross salary is reduced by £145 per month to cover the premium? The net cost to DH would be £100.05 per month and the employer would also save employers NIC on this amount.

polkadot

ceeforcat wrote: »

No - allowance reduced by £1 of every £2 over 100000 of earnings until zero.

On the pruhealth - has the employer considered salary sacrifice whereby the gross salary is reduced by £145 per month to cover the premium? The net cost to DH would be £100.05 per month and the employer would also save employers NIC on this amount.

I think they have but it wasn't popular with other staff members.Judging from Claptons calculations-paying the tax on it works out cheaper for the employee in the long run.

Ive put our earnings at £2000 for SOA purposes for now-any extra can just be moved into savings until it makes an amount called for snowball and seen as a bonus payment.

Thanks for all the replies...pretty exciting really, we've been on £26500 since 2007 so we're looking forward to adding this extra to snowball

Will pop back when we have a full payslip to give the final figure.