Income Tax Thresholds

beer_tins

Hi all,

Sorry if this is a stupid question, but I'm trying to work out the Level after which someone would start paying higher rate tax.

According to the HM Revenue & Customs site, it's £37,400-£150,000. So, assuming a personal allowance of £6475, that means everything over £43,875 is charged at higher rate tax, correct? Also assuming the income is less than £150,000.

And a second question, if an employee is part of a work stakeholder pension scheme, his or her pension contributions don't count as taxable income, right? Again, I realise that there is a proposed maximum amount on this (£50,000 a year I think).

Thanks in advance.

Gertie_Walker

Yes, everything below £43,875 is charged at 20% and over that and under £150,000 at 40%. Yes, relief is given at source for company pension conts.

beer_tins

Thanks very much. I know it's a basic question, but I couldn't find an answer elsewhere

hugheskevi

Just to add, remember that the Personal Allowance gets withdrawn at £100,000 which produces a higher marginal tax rate (60% as I recall) on income between something like £100,000 and £110,000.

CLAPTON

well
you pay tax at 40% over 43,875
at 100,000 the tax allowance of 6475 is reduced by £1 per £2 earned and after 150,000 you pay 50%

if the pension payment is deducted from your gross salary then tax relief at the appropriate rate will be given automatically; however if the pension payment is deducted from taxed income then standard rate tax is automatically accounted for but if you are a 40% tax payer you will need to reclaim the extra from HMRC yourself