40% Income tax threshold- question

MK_81

Hi everyone,

this is probably a daft question with a blindingly obvious answer, but I'm a bit confused as to what exactly is the threshold at which you start paying 40% on your income.

I was always under the impression that it was just north of £40k, like the Guardian say:
- "The amount you need to earn before becoming a 40% taxpayer falls to £41,450 from £42,475"

However, the HMRC's site says that the switch from basic to higher rate starts at £32,011 as of this month (dropping like a stone the last few years thanks Gideon).

This tallies with the letter I got from the revenue a while back claiming I had somehow underpaid by £2k last year (have been between jobs but always on PAYE). It was a bit of a shock to see that at the time a salary in the mid 30s was attracting, in part, higher rate income tax.

I'm sure I'm mixing things up somehow but on the face of it this is a contradiction.

Could someone please clear this up for me? Much appreciated!

nomunnofun

THE most repeated question on the forum - the amount that you can earn before becoming higher rate is £32010 plus your personal allowance of 9445 - 32010 is the amount upon which you pay at 20%.

MK_81

Right, fair enough, thanks. Was confused by the tax document which appears to suggest I am paying some income at 40%, which can't be right if you take the allowance into account. I'll have to take another look I think....

chrisbur

MK_81 wrote: »

This tallies with the letter I got from the revenue a while back claiming I had somehow underpaid by £2k last year (have been between jobs but always on PAYE). It was a bit of a shock to see that at the time a salary in the mid 30s was attracting, in part, higher rate income tax.

Proberbly a good idea to put the figures up on here for someone to check.

somethingcorporate

try https://www.listentotaxman.com it will tell you how much tax you pay in each bracket. The above poster is obviously correct, mid 30s unless you have some huge BIKs (car, health insurance etc) you will not be anywhere near 40% tax.

MK_81

Thanks will get the figs up if I can't resolve this myself. Previous job for part of the 11/12 tax year did indeed have some BIKs (travel insurance, and a SimplyHealth discount-type package which I paid a minimal amt for once a year)- the latter was not used once in 2 years, and was only worth a 'few hundred'.

I need to look at this tax doc again later but these seem to be showing up as huge additional taxable items resulting in this underpayment (out of all proportion to their value as far as they were 'sold' to me for).

"Tax, it doesn't have to be taxing (but somehow is)"