Income tax

WEM

Hi, sorry if this is in the wrong forum but wasnt sure where to put it. This year im looking a breaking the £35001 tax barrier. I will probably do this with 6-7 weeks left of the financial year, making around £39500-£40500 by the end of the year(april). My question is do I start paying 40% tax the week i start earning over 35k or does it just alter my tax band next year? I cant afford to see 45% of my earnings taken away as its only myself who works, my wife looks after the kids.

Any advice would be great thanks Wem

Mikeyorks

The 40% band starts at £42475. The £35k is the limit of the 20% taxable band - you have to add the £7475 personal allowance to the bottom end first.

If you do go into 40% ...... you only pay that above £42475 and it will be paid throughout the year if you're paid relatively evenly

CLAPTON

you have a 7475 tax free alowance and then the next 35,000 is taxed at 20%

so you need to earn 42,475 before you are due any tax at 40%
if you pay into a pension then that is tax free, so if you paid say 3,000 into a pension then 40% tax would start at 45,475

and the way the tax works is that your alllowances are spread out evenly though out the year so you don't suddenly get 42% of your earnings deducted

WEM

Thank you both for your help. Was panicing a bit to think of all that money disapearing, as long as I do very little overtime I should be exempt. Its sad though that 1 person can earn £55k and have to pay 40% tax on so much yet a couple can earn £80000+ between them and still only pay 20%!

Thanks again WEM

chrismac1

Plenty of people earn well over 42,475 without paying any 40% tax. Pension contributions are the "normal" mthod of achieving this as well as being normally a good investment in the future.

CLAPTON

WEM wrote: »

Thank you both for your help. Was panicing a bit to think of all that money disapearing, as long as I do very little overtime I should be exempt. Its sad though that 1 person can earn £55k and have to pay 40% tax on so much yet a couple can earn £80000+ between them and still only pay 20%!

Thanks again WEM

first the good news ; you only pay the higher rate on the amount OVER 42,475

the bad news is that the if you earn less than 42475 you actually pay at your marginal rate
20% tax plus 12% NI i.e. 32% deductions
if you are over that then your marginal rate is 40% tax plus NI at only 2%
i.e. 42% deductions

so more but not as much more as you seem to think

jennifernil

You need to remember that if you earn more you will be left with more, even after tax.

If you earn £1000 in overtime, even if you pay 40% tax, you will still keep £600 (minus any NI).

So, if you want to increase your income, and are happy working overtime, why not?