Personal Tax Allowance HELP!

Shampoo83

I have a question regarding my personal tax allowance, my tax code has just changed on the 28/12/10 to 631L from 635L.

I work in sales and my commission accounts for multiple times my basic, but is extremely erratic in terms of what i get paid month by month, anything from £5k to £20k a month.

I know that my personal allowance is £6495, and once i go over £100k i start paying it back.

I am approaching that figure and would like to know if i would have been paying it back each month or over the next three months am i going to see £6495 come out of my pay check in large lumps??

Thank you in advance for any help!

chrismac1

No if you are on PAYE it goes through 1/12 per month. So if after month nine your taxable gross exceeded 9/12 of 100,000 - so 75,000 - your marginal rate of tax is 60%. This 60% rate arises because the so-called higher rate is 40%, but between 100,000 and 112,950 you lost 50 pence in tax-free allowance for every £1 of taxable gross.

Most people in your position decide to make additional personal pension contributions to bring their marginal rate back down to 40% - but there are other options, and this approach does not suit everyone. If you want a ready reckoner to see how much you need to put in to beat the 60% tax then PM me.

zygurat789

The additional 20% tax on incomes between £100,000 and £112,950 is not included in the tax tables. It will have to be collected by SA, so you will be sent a tax return which you will have to complete and return to HMRC.
This additional tax will amount to £1,295. You could always defer any commission that would take your income over £100,000 until April 6 2011 which would avoid the need for a tax return.

Shampoo83

Thanks for the information, this is what i think i am going to do... firstly i'll defer all commission till after april. I cant defer my basic though, so could i make a large contribution into my pension to ensure my pay is £99,999 for the financial year? I.e if if i take my basic only until april i will earn £105k, so can i make some large pension payments every month?? so i dont break the thresh hold or does that even matter?

zygurat789

What matters is the totals at the year end (5/4/11).
You don't need to make a large contribution, just £6,000 on your figures. This is only 6%, an amount which some would consider the minimum.

Mikeyorks

Shampoo83 wrote: »

so i dont break the thresh hold or does that even matter?

Yes ........ because if you exceed £100k you need to advise HMRC in order they can enrol you within SA (as you don't sound to be making SA Returns currently) :-

http://www.hmrc.gov.uk/sa/need-tax-return.htm#1


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