Paye coding notice

kalechor_2

Hi everyone,
Today i got my PAYE coding notice for the year 2014-2015
I am confused so here is my query

At 20% on the first 31865? is this means that they will charge me basic rate ie 20% on my salary.. what if my salary falls less than 31865.. will it be still 20%?

Thanking you in anticipation

molerat

You pay 20% tax on the first £31865 above your tax free allowance, normally £10000 for 2014-15 but confirmed by your tax code on the coding notice.

agrinnall

You are indeed confused.

Your pay has a number of components for taxation purposes.

First is your personal allowance, as noted by your tax code. For most people this is currently £9440 (944L tax code) and means that this amount is received free of tax (going up to £10,000 next year).

Next is the portion which attracts basic rate tax at 20%. For this tax year that amount is the difference between your personal allowance and £32,010 (and will be £31,865 next year).

Above that amount you pay higher rates of tax on the amount over the limit, 40% up to £150K and 45% above £150K.

So as an example, if you have the standard personal allowance and earn £34,000, then in 2014-5 tax year you will pay tax of £0 + (20% of (£34,000 - £10,000)), or 20% of £24,000 = £4,800.

National Insurance payments complicate how much you actually take home at various levels, I tend to use http://www.thesalarycalculator.co.uk/salary.php to work out how much I will have.

jennifernil

" Next is the portion which attracts basic rate tax at 20%. For this tax year that amount is the difference between your personal allowance and £32,010 (and will be £31,865 next year)."

That could be a little confusing, though I do know what you mean. Perhaps clearer to say........

If we take next year, when the personal allowance will be £10000, as an example....
If you have a 1000 tax code, the first £10000 is tax free, the next £31865 will be taxed at 20%, and so if you earn over £41865 you will pay 40% on the next whatever, and so on.

However the working out of tax on £34000 wages was fine.

agrinnall

jennifernil wrote: »

That could be a little confusing, though I do know what you mean. Perhaps clearer to say........

Yes, I wanted to allow for not knowing what the OP's tax code is, but you're right that it's clearer the way you've done it, and correct for anyone who doesn't vary from the standard personal allowance.

purdyoaten

agrinnall wrote: »

Yes, I wanted to allow for not knowing what the OP's tax code is, but you're right that it's clearer the way you've done it, and correct for anyone who doesn't vary from the standard personal allowance.

And, in this nice simple tax system of ours, we have not even addressed the issue of the loss of personal allowance at £100k plus.

zygurat789

purdyoaten wrote: »

And, in this nice simple tax system of ours, we have not even addressed the issue of the loss of personal allowance at £100k plus.

Which, of course, cannot be dealt with throught the code number much like the age allowance which was simplified out of the system. But then age allowance was giving money away whereas the loss of PA is collecting extra. Or am I being too cynical, I just know I will never vote for a politician agagin.