A taxing question

Cazz

If I earn £34k p.a. I pay 20% tax. If I earn over then I pay 40%. Surely it's better to remain on lower salary as you'd have to earn over £50k to make it worth going into the 40% bracket? Or am I missing something?
Really appreciate comments.

BoGoF

Yes, you're missing the fact you only staty paying 40% tax if your earn over £42,745

tim9966

My understanding is you only pay 40% on what you have earnt over £42,745.

So you get £6000 or so tax free.
Then pay 20% on £6,000 to £42,745
Then pay 40% on £42,745 upwards.

So someone on £44K a year would still be better off than someone on £41K.

skintandscared_2

You only pay 40% tax on the amount OVER the 40% tax band. You will never be worse off earning more, you just pay a higher rate on any amount earned OVER £42,750 (band taken from previous post - I wasn't sure what the actual band was).

Eg, if your salary was £43,000, you would pay 40% tax on just £250.

Cazz

So I was missing something...duh.

Thanks to all who have clarified for me.

BoGoF

tim9966 wrote: »

My understanding is you only pay 40% on what you have earnt over £42,745.

So you get £6000 or so tax free.
Then pay 20% on £6,000 to £42,745
Then pay 40% on £42,745 upwards.

So someone on £44K a year would still be better off than someone on £41K.

Not quite,

for current tax year first 7475 tax free, then next 35,000 at 20% then 40% (unless you are luck enough to earn over £150,000 when 50% kicks in)