40% Threshold

jem16

Mrs_Money wrote: »

No, 40% tax rate now kicks once earnings reach £34370 (tax year 12/13).

No it doesn't. That's the taxable band after the personal allowance. You have to add both together - £8105 plus £34,370 which equals £42,475.

As OP correctly said personal allowance has gone up a little, threshold for 40% has come down- that's how they balance the books LOL

Yes it is. However the OP isn't anywhere near the 40% band so gets the benefit of the increased allowance.

Mrs_Money

Well, yes of course- we all have a personal allowance - I took it that everyone would understand that. Each person has the personal allowance, then they pay 20% on the income up to £34370, then 40% on income above that until the level reaches £150000 then it's 50%.

It's all on the link I put in my post (HMRC web page) scroll down for all the new tax years bands.

jem16

Mrs_Money wrote: »

Well, yes of course- we all have a personal allowance - I took it that everyone would understand that.

Everybody understands they have a personal allowance. Not everybody understands that they have to add it to the taxable band hence why the OP asked the question in the first place.

Each person has the personal allowance, then they pay 20% on the income up to £34370, then 40% on income above that until the level reaches £150000 then it's 50%.

Not quite accurate either. After £100k you start to lose some of your personal allowance.

It's all on the link I put in my post (HMRC web page) scroll down for all the new tax years bands.

I'm well aware of the tax bands. However it doesn't help when people are unaware of exactly how they are operated which is why I have clarified the amount you can earn before being in the 40% tax bracket.

SaverSavvy123

jem16 wrote: »

No it doesn't. That's the taxable band after the personal allowance. You have to add both together - £8105 plus £34,370 which equals £42,475.

Yes it is. However the OP isn't anywhere near the 40% band so gets the benefit of the increased allowance.

With the reduction in the taxable band I have been taxed an extra £40 this month, I do not earn over £42,475 when pension deductions have been made. I checked with HR and was told it was because I earn slightly over the £34,370.

I thought I would pay slightly less tax this month due to the increase on the personal allowance, was surprised to find that the 40% band had decreased.

jem16

SaverSavvy123 wrote: »

With the reduction in the taxable band I have been taxed an extra £40 this month, I do not earn over £42,475 when pension deductions have been made. I checked with HR and was told it was because I earn slightly over the £34,370.

Is your pension contribution taken from post or pre tax? It sounds like it might be post tax.

I thought I would pay slightly less tax this month due to the increase on the personal allowance, was surprised to find that the 40% band had decreased.

Yes the 40% tax band has decreased in line with the increase in personal allowance so the total taxable income remains the same as last tax year.

If your pension contributions are being taken after you are taxed you will have to claim the extra back from HMRC.

Mikeyorks

SaverSavvy123 wrote: »

it was because I earn slightly over the £34,370.

More to it than that - I suspect.

Do you have 'benefits in kind' ...... such as a company car? If not - what's your 12/13 Code number?

jem16

Mikeyorks wrote: »

Do you have 'benefits in kind' ...... such as a company car? If not - what's your 12/13 Code number?

Good questions Mike.

MoneyMac

Sorry can i just jump in.

My husband earned £45000 last year and most probably will be that this coming tax year. Ref Benefits in kind he has car benefit on his coding of £4051 do you in effect add this amount to the earnings of £45000 as if it was salary, then take off personal allowance and then get taxed on the difference, if so that makes him 40% tax. Sorry if i sound a bit like i don't fully understand it, if so how much will he pay 40% tax on?

Thanks in advance

MoneyMac

Also missed a bi, he also has £2403 on his coding for underpayment of tax (that's another issue being dealt with ) does that also get added as if it is salary?

Thanks

Mikeyorks

MoneyMac wrote: »

Also missed a bi, he also has £2403 on his coding for underpayment of tax

It's 'yes' to both of those. But he'll be on 40% above £42475 in any event. Unless he contributes to a pension which will usually have the effect of reducing the threshold.