Income tax

davee64_2

Can someone clarify this for me.

When am I liable to pay 40% tax?. Is it;

A) when my gross pay reaches £32,011

when my gross pay reaches £41,451. (this includes my personal allowance of £9,440)

I am convinced it is A, but my mate reckons the IR told him it's B.

googler

HMRC sez A for 2013-14, different for prev tax years

http://www.hmrc.gov.uk/rates/it.htm#2

davee64_2

Thanks Googler. I also think it is A, however just found this from Monevator.com;

For example, if you will earn £40,000 in 2013/14 from all sources and you’re under 65, then your taxable income is £40,000 minus your basic allowance of £9,440, so £30,560.

That will put all your income within the 20% tax bracket, as it’s less than £32,010; you’ll pay no tax on the first £9,440 you earn, and 20% on the remaining £30,560.

If you earn £50,000, then by the same method your taxable income is £40,560. The first £32,010 will be taxed at 20%, and the rest at 40%.

Note that in nearly all cases you will also pay hefty National Insurance contributions.

Am still confused. Don't want to do O/T for 40% towards end of the year...

uptomyeyeballs

From the phrasing of the original question, I think it's B.

No tax on first £9,440
20% on the pay between £9,440 up to £41,451
40% on anything above that

chrisbur

It is B. Also worth remembering that if you have the full basic tax allowance of £9440 and your earnings are spread out fairly evenly then when you start paying 40% tax your NI goes down, for most people from 12% to 2%.

googler

So when HMRC says the basic rate taxable band is £0 - £32,010, what they mean is that £0 really equates to £9,440 ...?

Davide123

googler wrote: »

So when HMRC says the basic rate taxable band is £0 - £32,010, what they mean is that £0 really equates to £9,440 ...?

The key word there is taxable.
The first 9440 is not taxable. So it is taxable pay over 32010 at 40%.

googler

Davide123 wrote: »

The key word there is taxable.
The first 9440 is not taxable. So it is taxable pay over 32010 at 40%.

Well, there's a section that could do with some attention from the Plain English Society.

What they're REALLY saying is that the taxable band is £32,010 wide, and the 'zero point' at which it starts is £9,440 ..... ???

_Andy_

davee64 wrote: »

Can someone clarify this for me.

When am I liable to pay 40% tax?. Is it;

A) when my gross pay reaches £32,011

when my gross pay reaches £41,451. (this includes my personal allowance of £9,440)

I am convinced it is A, but my mate reckons the IR told him it's B.

Have you rung IR and asked?

gb12345

_Andy_ wrote: »

Have you rung IR and asked?

Why do that when you can ask a mate or a random person on t'Internet?

_Andy_

gb12345 wrote: »

Why do that when you can ask a mate or a random person on t'Internet?

good point. It's only a tax issue after all