Really basic tax band question...

runscreaming · 10 March 2013 at 12:12PM

...that I think I've fundamentally misunderstood! I'm newly self-employed and have been tootling along filling in my spreadsheet ready to do my tax returns for this financial year and trying to predict what my tax bill will be (so that I can save for it!), but it occurs to me now that I may have fundamentally misunderstood something quite basic with regard to the tax bands.

According to the HMRC website my personal allowance for the current tax year is £8105.
The 20% tax band is £0-£34370
The 40% tax band is £34371-£150000

Am I correct that these tax bands are on top of my personal allowance. i.e. I don't start paying 40% until my gross income is £42476 (£8105 plus £34371)?

I've been doing my calculations based on expecting to start paying 40% at £34371 gross but I now think that's wrong...and I have rather less tax to pay than I was expecting! But would just like confirmation of this rather happy event!

notanewuser · 10 March 2013 at 12:13PM

runscreaming wrote: »

...that I think I've fundamentally misunderstood! I'm newly self-employed and have been tootling along filling in my spreadsheet ready to do my tax returns for this financial year and trying to predict what my tax bill will be (so that I can save for it!), but it occurs to me now that I may have fundamentally misunderstood something quite basic with regard to the tax bands.

According to the HMRC website my personal allowance for the current tax year is £8105.
The 20% tax band is £0-£34370
The 40% tax band is £34371-£150000

Am I correct that these tax bands are on top of my personal allowance. i.e. I don't start paying 40% until my gross income is £42476 (£8105 plus £34371)?

I've been doing my calculations based on expecting to start paying 40% at £34371 gross but I now think that's wrong...and I have rather less tax to pay than I was expecting! But would just like confirmation of this rather happy event!

Yes, they are on top of whatever your personal allowance is.