upper tax bracket

langfangcharlie

I have been offered a promotion that gives pay rise but i am concerned that it may put me above the upper tax limit and am concerned that the extra work involved may not be worth it if the tax man takes a chunk

status basic £38827 + extras that will be about 5k a year

any ideas?

Andy_L

http://www.hmrc.gov.uk/rates/it.htm

40% starts at £39825 so about £4k will be taxed at the higher rate (assuming the extras are taxable)

cash99

langfangcharlie wrote: »

I have been offered a promotion that gives pay rise but i am concerned that it may put me above the upper tax limit and am concerned that the extra work involved may not be worth it if the tax man takes a chunk

So many people have this fear of paying higher rate tax. Are they aware that you only pay tax on the excess above the basic rate tax band. While I agree it is desirable to pay as little tax as possible, you cannot be worse off by having a higher income which takes you into the higher rate tax band.

Why in this case would you give up a promotion beacause you will pay marginally more tax. If you don't want the job fair enough, but you will get more money.

From 2008 when the upper earnings limit for NIC and the higher rate tax threshold are merged moving into the higher rate tax will mean moving from a rate of 31% to 41% (tax and Nic combined), not great but not exactly something to be avoided at all costs.

ManAtHome

You could always stick the extra into your pension fund.

mattymoo

Cash99 - what you say is correct but you also need to remember that any taxable benefits will be taxed at the higher rate. The OP needs to check their P11D.

As an example, I went from a cushy lowish paid job (£27k) to the same job but much longer hours (60 hours plus a week) at £39k. At one point I was only taking home £300 a month more than the old job net.

Part of this was down to a delay sorting out the P11D resulting in an underpayment and a poor choice of co car on my part but I was pretty hacked off with the whole thing. I certainly pay more attention to CO2 values now

RayWolfe

So mattymoo, because of errors, does your experience make a good case? Cash99 is correct.

nealnomoney

Andy_L wrote: »

http://www.hmrc.gov.uk/rates/it.htm

40% starts at £39825 so about £4k will be taxed at the higher rate (assuming the extras are taxable)

Higher rate 40% starts at £34600

Bean_Counter

nealnomoney wrote: »

Higher rate 40% starts at £34600

of taxable income. Andy simply added the personal allowance to make an accurate comparison to salary levels. Seems correct to me.

nealnomoney

To someone who didnt know it looks to them that they would be taxed at 22% up to £39825. I am right

Bean_Counter

nealnomoney wrote: »

To someone who didnt know it looks to them that they would be taxed at 20% up to £39825. I am right

You are 100% wrong. Seemed clear to me. Where does 20% come from anyway? That's not until 2008-09. Everyone else is in the current tax year.

nealnomoney

22% sorry. Typo error. There was no mention of personal allowance in in Andy L's post