Higher Rate Tax Question - Am I poor for the rest of the financial year?

Psychological_2

Well it would seem that 20% of my gross pay to date of £38,282.26 works out at £7,656.45 (roughly what it says on my latest payslip as tax paid to date) which leads me to believe they have only been applying the lower rate tax band thus far. Meaning the second I reach the threshold they will simply take 40% out of my remaining pay packets. Quite a sting really if have this right?

Psychological_2

I realise the above may seem a little spoilt of me, I am lucky to be in this financial position but am just amazed the inland revenue doesn't handle it better rather than just leaving me with a massive bill to pay and lighter paypackets at the end of the financial year!

CLAPTON

Psychological wrote: »

I realise the above may seem a little spoilt of me, I am lucky to be in this financial position but am just amazed the inland revenue doesn't handle it better rather than just leaving me with a massive bill to pay and lighter paypackets at the end of the financial year!

I think I may have confused things so I will explain in detail

1. firstly the HMRC does NOT deduct tax from your pay; this is done by your emplyer's payroll system. If your tax code is correct then your tax will be correct.


2. Assuming your gross pay after deduction of any pension payments is 38,282 from april 2010 to the end of december

3. your tax allowances are 6475 tax free of which you are allocated on a prorata basis 9/12 th (as there are 9 month of the tax year gone i.e. 6475 x 9/12
i.e. you get 4,856 tax free for theses 9 months

4. then the next annual allowance at 20% is on 37,400 which is pro-rata for the 9 months giving 9/12 of 37400 = 28,050


so the calculation is

38282
less 4856 tax free
= 33425 to be taxed
the first 28,500 is taxed at 20% i.e. = 5,610
the remainder of 5375 at 40% = 2150

so your total tax to date should be about 7,760

5. if you have had no change in tax code and no change in gross pay then your take home pay in Jan, and Feb and March will be EXACTLY the same as for Dec


hope that makes in a little more clear.

Psychological_2

Crystal clear! That makes a whole lot more sense thanks