Tax bandings

BabyBoots

If basic rate tax is earnings up to £34,370 and the personal allowance is £8,105, do you pay higher rate tax on anything over £34,370, or anything over £34,370 plus £8,105 = £42,475?

Sorry if this is obvious!

CLAPTON

42,475

if however you pay into a pension fund then that's tax free ; so if you paid say 5k gross into a pension fund then you wouldn't pay 40% until you earned 47,475

BabyBoots

Great, thanks. That's really helpful to know about the pensions contributions too.

chrismac1

Babyboots - it is NOT obvious and probably gets asked on here several times per month. In my view the way HMRC standard tax tables are set out is really confusing, usually the number 42,475 appears NOWHERE on them.

Now these are the same people who in Esc A19 and other situations put the burden on the taxpayer to know exactly when he or she has become a higher rate taxpayer. Yet they make this is as difficult as possible by not even including this number on their standard tax tables.

How hard can this be? Incidentally I get this same question all the time from new clients and potential clients, likwise it is possible to spend 10 or 15 minutes on the phone to the tax helpline people and not once hear the number 42,475 when asking about the starting point for higher rate tax.

getmore4less

Don't forget that NI drops 10% at the same time so the increase in tax is only 10% not 20%.

allthough the exect numbers/rates change at different levels for tax and NI depending various other reasons like, pension payments, BIK, benifts...