40% Tax question

LILSTACEY

Hi,

I am wondering if you can help me. I am a Registered Midwife and work full time with a salary of £35,000 (before tax and inclusive of unsociable hours). I am considering doing a few agency shifts, but was wondering if how the 40% tax band works?

Is it that if I hit the 40% tax bank, all my salaries will be taxed at 40%? Or is it just any earnings over that amount?

I.E: My earnings £41,000 will be at 20%
£7,000 at 40%

If I earned £48,000 this year for example? (I understand that my total earnings would acutually be around £58,000 including personal allowance)

Thanks

dzug1

Only the excess is taxed at 40%

Arranging things so that this happens automatically and not by means of your tax return at the end of the year can be a challenge though

nomunnofun

LILSTACEY wrote: »

Hi,


Is it that if I hit the 40% tax bank, all my salaries will be taxed at 40%? Or is it just any earnings over that amount?

Thanks

If you think about it logically:

Someone earning £41450 taxable is a basic rate taxpayer who will have paid £32010 at 20%.

It would never make sense if that person earned, say, £41500 and now paid £32060 at 40% That extra £50 would make them £6372 worse off!

zygurat789

nomunnofun wrote: »

If you think about it logically:

Someone earning £41450 taxable is a basic rate taxpayer who will have paid £32010 at 20%.

It would never make sense if that person earned, say, £41500 and now paid £32060 at 40% That extra £50 would make them £6352 worse off![/QUOTE]

That's how national insurance used to work.

Now if you earn over £41,450 pa then your employees national insurance goes DOWN from 12% to 2%, so the extra 20% PAYE is reduced to a total of only 10% additional deductions; you would hardly notice the difference!

martinsurrey

zygurat789 wrote: »

That's how national insurance used to work.

Now if you earn over £41,450 pa then your employees national insurance goes DOWN from 12% to 2%, so the extra 20% PAYE is reduced to a total of only 10% additional deductions; you would hardly notice the difference!

NI has always been the forgotten tax

Not many people realise that their real marginal tax rates are 32% and 42%, so the change isn’t so bad from basic to higher rate, but it’s still not fun!

With my student loan my marginal rate is 51%

zygurat789

martinsurrey wrote: »

NI has always been the forgotten tax

Not many people realise that their real marginal tax rates are 32% and 42%, so the change isn’t so bad from basic to higher rate, but it’s still not fun!

With my student loan my marginal rate is 51%

And if you were a single (abandoned) mother with two children you would find that your marginal rate is over 70%

Be thankful yours is only 51%

Randvegeta

martinsurrey wrote: »

NI has always been the forgotten tax

Not many people realise that their real marginal tax rates are 32% and 42%, so the change isn’t so bad from basic to higher rate, but it’s still not fun!

With my student loan my marginal rate is 51%

I love how you think student loan repayments constitute a 'tax' on your income.

Don't forget the 'tax' on your mortgage too! And by 'tax' I mean repayments.

Student loans = best kind of loan. Or would you rather go American style and have to pay it back whether you could afford it or not.

I also love how people consider cuts in benefits a tax. Ironic is it not?

xylophone

Had you though of increasing your pension contributions?http://www.nhsbsa.nhs.uk/1289.aspx

martinsurrey

Randvegeta wrote: »

I love how you think student loan repayments constitute a 'tax' on your income.

Don't forget the 'tax' on your mortgage too! And by 'tax' I mean repayments.

Student loans = best kind of loan. Or would you rather go American style and have to pay it back whether you could afford it or not.

I also love how people consider cuts in benefits a tax. Ironic is it not?

I consider it a tax, yes, a tax I don’t mind paying and I was in no way complaining about it, I also don’t mind paying 40% income tax, as I only pay that because I’m fortunate enough to have a well paid job, I loved Uni (and the doors its opened up for me) and would make the same choice again.

http://dictionary.reference.com/browse/tax

I’m all about substance over form, you can package up something however you want and call it whatever you want, but a charge for a service that comes under the governments remit (which most people would agree includes defence, health care and education) is a tax, however it is collected, what ever it is called.

If they changed the NHS to say that if you use a hospital in any year you pay 15% of your salary until you’ve transferred £9,000 to the “Patient Loan Company”, would that be a tax? under your logic no, as your just repaying a “loan”? But in reality, you are paying for a service most people consider to be a state service, from your income, so it’s a tax.

I like many people consider education to be a state service (as it was for most of English history, package and fund it however you like) and as such I don’t see it as too much of a stretch to say paying a compulsory amount for that service taken through your payroll, is a tax, you have to be careful to split the tuition fee element (education tax) of the student loan from the maintenance element (living cost loan) though.

John_Pierpoint

The oecd defines tax, if it is a compulsory unmitigated payment levied on citizens, it is a tax.

Do you remember the fuss there was when the government arbitrarily cut the Feed in Tariff in the run to Xmas 2011 instead of waiting until the end of the tax year.
The FiT is a transfer payment, as are a lot of taxes, where the government using the agency of the electricity companies, decided to collect money from everyone using electricity and transfer that to subsidise the production of sustainable electricity.

The realisation that these figures would appear in the national accounts, further highlighting the proportion of the economy now managed by the deficit state, was one of the causes of the panic.

So don't forget there is 5% VAT plus a climate levy tax on your electricity bill.

tebow

xylophone wrote: »

Had you though of increasing your pension contributions?http://www.nhsbsa.nhs.uk/1289.aspx

this is interesting

i found this within your link zygurat789:

Q. Will I get tax relief on my AP contributions?
A. We cannot advise you about your personal tax position but members of a registered pension scheme, like the NHS Pension Scheme, can normally contribute up to 100% of their salary and claim tax relief. The Scheme Guide contains more information about limits on contributions and benefits and is available on the website at: https://www.nhsbsa.nhs.uk/pensions
When paying for AP by instalments tax relief is usually received through the PAYE system. If you pay by lump sum you will need to contact your local tax office or complete a self assessment tax return to claim the tax back.

so essentially if my NHS salary was going to be 45k, and the tax threshold was 41k, I could choose to pay 4k into my pension, for example monthly through PAYE, thus not paying 40% tax (£1600) on the 4k, and receiving the benefits of having had increased pension contribution by 4k for essentially a real-terms total cost of £2400 or even less when NI and student loan is factored into that (not sure of how much that would be though this is where my knowledge/guessing ends!). - Is that right?