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Autumn statement 40% tax confusion
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nannon
Posts: 96 Forumite
in Cutting tax
I've just moved into a brand new job which was a massive increase on previous salary buthas put me in 40% tax bracket.
I know that 40% tax starts on earnings over £34,371 however the autum statement stays that
"The threshold forthe 40% rate will rise by 1% in 2014 and again in 2015, from £41,450 to£41,865, and then to £42,285." (quote from BBC News FAQs)
What does that meanbecause 40% tax doesn't start at over £40k? :huh:
I've tried looking online for answers but HMRC states exactly what I already knew and doesn't explain where this figure of £41,450 comes from.
Can anyone give me some advice?
Thanks very much!
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Comments
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You are confused because you do not have a grasp of the correct figures.
One starts to pay tax currently on income over £42475 - that is £34370 plus the personal allowance of £8105.
This will reduce to £41450 for 2013/14 tax year.0 -
I think you are forgetting the tax free allowance, so the statement above should say:
"I know that 40% tax starts on taxable earnings over £34,3710 -
Thank you for your advice.
ceeforcat I asked for help because I didn't have the right grasp.. because no one has ever explained them too me.
TadleyBaggie: Thanks for being a bit politer about my confusion0 -
Find a useful income tax calculator here:
https://www.listentotaxman.com
It may be a few days / weeks until it is updated with the new figures but will give you a handy breakdown of what you are currently paying.Thinking critically since 1996....0 -
You are confused because you do not have a grasp of the correct figures.
One starts to pay tax currently on income over £42475 - that is £34370 plus the personal allowance of £8105.
This will reduce to £41450 for 2013/14 tax year.
I merely pointed out the fact that you did not have a grasp of the correct figures because you stated that you knew 'that 40% tax started on earnings over £34371.' Had you known this to be incorrect everything else would have followed.
I apologise if my statement of fact has offended you in any way.0 -
I'm always astonished to find that people have somehow managed to be in a position where they are earning enough to pay higher rate tax but have not the slightest clue about how tax works - are they all professional footballers, or just stupid and lucky?0
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ceeforcat: Very kind of you to explain and I appreciate what you were trying to say.
somethingcoprorate: The site appears to be useful, thanks for suggesting
agrinnall: I'm not a footballer.. I'm not lucky and I'm certainly not stupid.. I work very very hard for my money just like anyone else.
My previous job I earnt over 45% less than I'm on now so I have never been in the position before.
I want to educate myself on tax... Hence my posting and people have been kind enough to help. Tax information can be very confusing.. even for those who are not stupid0 -
You are not alone. In my client base I have doctors, senior project engineers, directors of large companies - and I have to explain it to them all!
It certainly does not help that most tax tables - and very often stuff put out by HMRC too - states 34.370 as the "basic rate band" or similar.
And this is, relatively speaking, the easy peasy bit of the tax system. As I have posted on here numerous times especially for Esc A19 victims, the burden the UK tax laws place on most people to be able to understand their tax position - and especially where 20% tax ends and 40% begins - is so unreasonable it is a joke.
I was helping someone this week to challenge a back claim from HMRC this week going back to 2007-2008. So on the one hand these jokers expect us all to keep fully up to date with each and every Budget and know exactly how our income, less reliefs, stacks up against higher rate tax. Yet at the same time these ditherers take over 4 years to add up their abacuses!
What a shower!Hideous Muddles from Right Charlies0 -
No, there is some confusion in todays statement. Prior to today, the tax free allowance for 2013/14 was expected to be £9205 and the 20% tax band £32245, meaning we could earn a total of £41450 before paying 40%. However we now know that the tax tax free band has risen by another £235 to £9440. And in his statement Osborne said 'And this time I propose toextend the benefits of this further increase to higher rate taxpayers.', implying the 20% band should stay at £32245 so 40% tax should kick in at £41685. Yet elsewhere in his speech Osborne says 'The higher rate threshold will beincreased by 1% in the tax years 2014-15 and 2015-16. So the income at which peoplestart paying the 40% rate will go up from £41,450 to £41,865 and then to£42,285.' ie in these later figures he has not recognised the £235 increase. So it is unclear. Hopefully the 40% tax band for 2013/14 will be £32245 but it might be £235 less ie £32010.
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Don't forget that you will also still be paying National Insurance (if you are wanting to work out what your new take home pay might be)0
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