Taxed 32% on extra pay?

kmb500

Hi,


I earn £1821.83 per month which by my calculation is £21861.96 salary per year. I did some extra work this month and got paid £331.20 extra for it. But I got my payslip and the tax seems like a lot. I got taxed £415.56. I won't be earning anything else for the rest of the year so that would make my 2017 earnings to be £22193.16.


I don't know normally what my tax is because I was paying £100 of my earnings on pension but I have just opted out so this is the first pay slip with no pension deduction. But judging by MSE calculator I should be paying £173 income tax and £137 national insurance. So now paying £238.80 income tax and £176.76 NI seems very high!


I earned £331.20 extra but got taxed £105.56 more which is 31.8% tax. I thought the tax rate is 20%.


Can anyone make sense of this?

Pennywise

kmb500 wrote: »

I thought the tax rate is 20%.

Tax is 20% but there's also 12% national insurance, total 32%

kmb500

Pennywise wrote: »

Tax is 20% but there's also 12% national insurance, total 32%

OK thanks. I'm still a bit confused though because, the tax + NI is usually 17% of my earnings. I don't really understand how this all works..

agrinnall

kmb500 wrote: »

OK thanks. I'm still a bit confused though because, the tax + NI is usually 17% of my earnings. I don't really understand how this all works..

That's because you haven't taken the value of your personal allowance into account.

00ec25

rather than explain (again) how income tax, national insurance and the personal allowance all come together to leave you with a net pay amount please read:

https://www.moneyadviceservice.org.uk/en/articles/understanding-your-payslip

and the links in it on how tax is deducted, eg:
https://www.moneyadviceservice.org.uk/en/articles/tax-and-national-insurance-deductions

and how pension deductions impact the above

BoGoF

As has been said your personal tax free allowance is used up against your regular monthly salary. Any extra work/overtime will then attract 20% tax and 12% NIC.

kmb500

thanks


I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.

TheCyclingProgrammer

kmb500 wrote: »

thanks


I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.

Compared to many other countries, UK rates of taxation aren't that high.

https://www.theguardian.com/money/2017/may/27/tax-britons-pay-europe-australia-us

worried_jim

kmb500 wrote: »

thanks


I looked up all the tax calculations and yeah I can see that the basic tax rate is 32% that's crazy! its expensive enough to live in this country as it is, anyway thank you for the help, I understand it more now.

No it isn’t. Just returned from the US and the pool cleaner has to pay $700 per month just for healthcare insurance. We have it so good in the UK.

kmb500

worried_jim wrote: »

No it isn’t. Just returned from the US and the pool cleaner has to pay $700 per month just for healthcare insurance. We have it so good in the UK.

well it just feels expensive when I am paying £600 for a room in a crappy shared house I really struggle for money. I just cancelled my pension so I can start saving some money. I'm just having a bit of a moan lol I didn't realise the tax rate, seems just to me that having 32% as the cheapest income tax rate is quite a lot in my opinion. and yeah US healthcare is awful on the other hand most stuff is a lot cheaper in America that's why you see people buying nice houses on low salaries and 15 year olds drive ford mustangs.


I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K!

worried_jim

kmb500 wrote: »

I went to America last month and in the town we were in, I looked in the window of an estate agent and there were very nice houses under £100,000 and plenty of ones under £50K!

This is true! Our 4 bed house was the same price as the 2 bed flat I live in. However, I am guessing your £600 pm room is close to London so might not be a like for like comparison.

Why did you cancel your pension? Massive mistake, please reinstate ASAP, compounded interest will work wonders for you.