40 % Tax Threshold, what can i earn?

Hofmeister

Hi, please clear up my confusion, i see sometimes the figure 35k, then other times 43+K. I am guessing that this is the 35 + tax allowance?

Anyway, my situation is this, i earn £36,120 per year, i salary sacrifice 6%, so my official salary is £33952.8 ( i am guessing?). I have a company car, and my tax code is 297L. What is the figure for me that kicks in the 40% tax payable, the reason i nervous, is, i understand, that if i am a 40% tax payer (for even 1 pound), then i assumed to be a 40% payer and this then affects what i have to pay tax wise for my company car....... please help, very confused.

CLAPTON

firstly

for standard people it goes like this

first 7475 is tax free
the next 35,000 is taxed at 20%
anything over that is taxed at 40% until you get to 100,000 when other changes take place

so basically you can earn 42,475 before 40% tax kicks in
and do note you only pay 40% tax on the earnings OVER 42,475 and not on all your income


if you pay into a pension then that tax free (up to 50k per annum)
so e.g. if you paid 3,000 inot a pension then you would only start to pay 40% tax once your gross income exceeds 45,475

then the complications

if you have benefits in kind (BIK) e.g. company car, health insurance etc then this is usually dealt with by reducing your taxcode

so in your case, assuming no pension payments, and that your BIK are all encoded in your reduced taxcode then
you would pay 40% tax on your income over 2975+35,000 i.e. over 37,975

Hofmeister

Thanks Clapton

lemonade_lifestyle

So (as I am also extremely confused) can I just confirm this -
my personal allowance is £7615
I then earn tax at 20% on the first £35000
I earn tax at 40% on income between £35001 and £150000.

Does this mean I can earn £42615 before I will pay higher rate of tax?

Need to double check so that I dont get caught in the trap with any extra shifts I may work.

Thank you

CLAPTON

as you describe it then yes you don't pay 40% until you earn 42625

remember
- that you only pay 40% tax on the earning OVER 42,615
- if you pay into a pension then that is tax free; so e.g. if you paid 3,000 into a pension, than that means you wouldn't pay 40% tax until you earned more than 45,615
- also remember that your deductions on earning below 42,615 you pay 20% plus 12% NI i.e.32% deductions ; after that you pay 40% plus 2% NI so 42%; obviously that's more but not a great deal more