Maximum Income Before 40%

Axel

Am I correct that you can earn up to £43,875 before paying the 40% tax. £6,475 free plus £37,400 at 20%.

Axel

GillsMan7

Not quite. Up to £6,475 it's nothing. Between £6,475 and £37,400 it's 20%, then anything over £37,400 it's 40%.

MrsManda

GillsMan7 wrote: »

Not quite. Up to £6,475 it's nothing. Between £6,475 and £37,400 it's 20%, then anything over £37,400 it's 40%.

Until you earn over £150,000 when you pay 50%
HMRC Income Tax Rates

chrismac1

In fact, it's now until you earn over £100,000 when you pay 60% because your tax-free allowance is nicked off you between £100k and £112,950 at 50 pence in the pound. This is a key area of tax planning for higher earners. £100k is a key psychological salary level, hence there is a blip in the salary distribution at that level - an example of a shrewd Labour stealth tax in action!

GillsMan7

Crikey. I didn't put the higher tax rate, because I didn't think it was overly relevant, but I had no idea the tax was that much at over £100,000!

CLAPTON

GillsMan7 wrote: »

Not quite. Up to £6,475 it's nothing. Between £6,475 and £37,400 it's 20%, then anything over £37,400 it's 40%.

this is incorrect

up to 6475 tax is zero
for the NEXT 37,400 i.e. between 6475 and 43975 it is 20%
over 43,875 it is 40%
if you pay into a pension then this is tax free

MrsManda

CLAPTON wrote: »

up to 6474 tax is zero
for the NEXT 37,400 i.e. between 6475 and 43975 it is 20%
over 43,875 it is 40%

Where did you get this from? I think it's you which is incorrect.
The HMRC website states that higher rate tax (40%) is payable on salaries over 37400 as stated by Gillsman, not the Next 37,400.

jem16

MrsManda wrote: »

Where did you get this from? I think it's you which is incorrect.
The HMRC website states that higher rate tax (40%) is payable on salaries over 37400 as stated by Gillsman, not the Next 37,400.

Gillsman is talking about taxable income and Clapton is talking about income.

Clapton is actually more correct as most people just think about thier income and get confused, as you have just done by mentioning salaries over £37,400.

You need to earn more than £43,875 to pay higher rate tax.

Cortinaa_GTR

What about if you have a £40k salary with a company car that is rated as a benefit of £3534 per annum. That would mean my tax free amount is £6475 - £3534 = £2941.

So 40,000 - 2941 = £37059 so does that mean I'm still taxed at 20% and the BIK is taxed at 20%?

CLAPTON

Parnott wrote: »

What about if you have a £40k salary with a company car that is rated as a benefit of £3534 per annum. That would mean my tax free amount is £6475 - £3534 = £2941.

So 40,000 - 2941 = £37059 so does that mean I'm still taxed at 20% and the BIK is taxed at 20%?

yes you will be taxed at 20%

opinions4u

CLAPTON wrote: »

yes you will be taxed at 20%

Although it will fall in to the 40% band from the 2011/12 tax year.