Taxed 32% on extra pay?

kmb500

worried_jim wrote: »

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.

Yeah my grandparents in America sold their huge 6 bedroom house for about £200K which is crazy.


I live in Cambridge, would hate to live in London but it's nearly just as expensive, just feels like the world is against me. I only have GCSEs nothing else so not in a position to go for high paying jobs.


I cancelled my pension because I was paying in over £100/month and I am struggling to put any money aside at all. So now I can put that money that would have gone to the pension, straight into a savings account. I know its worth less in the end but the pension can only be accessed in 40 years time so seems pointless.. just my opinion

lisyloo

I can see that the basic tax rate is 32% that's crazy!

I don't think it's high considering what you get (or potentially get) e.g. police, fire service, free NHS, free long term care, free care at home, free roads.

but the pension can only be accessed in 40 years time so seems pointless.. just my opinion

My opinion is that your opinion is wrong :-)
Sorry :-)
I am 49 now and hoping to retire at 58 without any high earnings.
I was possibly lucky enough to be born at a better time but IMO the most sensible things you can do are
1) get a mortgage
2) contribute as much as you can to a pension which have massive tax benefits

A mortgage might seem expensive but after 25 years you have a house !! Not rocket science, just making the payments.
Similarly a pension grows and when you have large amounts, your pension starts earning more than you.
I'm worth a large 6-figure sum and that's simply from doing those two things for 30 years, not from particularly high earnings, not caused by brilliant property market calls either as prices went down after I bought in 1991.

pelirocco

kmb500 wrote: »

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!

Thats just the starting costs , they have plenty of other costs to add at ourchase , and then there are the annual taxes ect

if it was cheap to buy and own proerty in the US they wouldnt have had the huge number of repossesions

Then of course there is the cost of healthcare

I dont think you have taken into account the tax free some you are allowed to earn before you pay taxes btw..........However you are right in the fact that we do need affordable housing , it has got out of control

BoGoF

The basic rate is NOT 32%

lisyloo

seems just to me that having 32% as the cheapest income tax rate is quite a lot

The cheapest income tax rate is 0%.
I don't disagree with what you say, but your overall tax rate would be lower as the first £11,500 is free of income tax.
If you put it into a pension you also get the income tax back, so if you agree to save it for your retirement then the government doesn't tax you. The downside is you can't touch it until at least 55 (as it's meant to be for retirement).

In some cases you can save employees NI, employers NI and also get a contribution from your employer.

I would strongly advise you not to dismiss pensions without doing some research about what your employer offers as it may be VERY good.
I get 45.8% tax relief, (32% plus 13.8% employers NI) AND my employer gives me money that I wouldn't other get (sometimes referred to as FREE money although it's not without conditions).

qwert_yuiop

[QUOTE=kmb500;
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![/QUOTE]

You have to pay property tax there, which is often as much as the mortgage. If you don’t pay up, they evict you.

kmb500

lisyloo wrote: »

I don't think it's high considering what you get (or potentially get) e.g. police, fire service, free NHS, free long term care, free care at home, free roads.

My opinion is that your opinion is wrong :-)
Sorry :-)
I am 49 now and hoping to retire at 58 without any high earnings.
I was possibly lucky enough to be born at a better time but IMO the most sensible things you can do are
1) get a mortgage
2) contribute as much as you can to a pension which have massive tax benefits

A mortgage might seem expensive but after 25 years you have a house !! Not rocket science, just making the payments.
Similarly a pension grows and when you have large amounts, your pension starts earning more than you.
I'm worth a large 6-figure sum and that's simply from doing those two things for 30 years, not from particularly high earnings, not caused by brilliant property market calls either as prices went down after I bought in 1991.

lisyloo wrote: »

The cheapest income tax rate is 0%.
I don't disagree with what you say, but your overall tax rate would be lower as the first £11,500 is free of income tax.
If you put it into a pension you also get the income tax back, so if you agree to save it for your retirement then the government doesn't tax you. The downside is you can't touch it until at least 55 (as it's meant to be for retirement).

In some cases you can save employees NI, employers NI and also get a contribution from your employer.

I would strongly advise you not to dismiss pensions without doing some research about what your employer offers as it may be VERY good.
I get 45.8% tax relief, (32% plus 13.8% employers NI) AND my employer gives me money that I wouldn't other get (sometimes referred to as FREE money although it's not without conditions).

The pension scheme is excellent - in the 7 months this year so far I paid in £760 and employer paid in £2250. So the total is quadruple what I put in. But like I said I can only use that money in 40 years time. If I want to save money it will be for a house, which is not something I'm going to wait until I'm 60 to buy. By the time I'm 60, I'll either be doing well for myself or I won't be. But I know for sure that I will want to save some money before I reach 60.


If I earned more I would rejoin the pension but I've just started living on my own this year and I'm finding myself with no money, and the extra saving every month will really help me.


Fair point about the lowest tax being 0% btw

qwert_yuiop wrote: »

You have to pay property tax there, which is often as much as the mortgage. If you don’t pay up, they evict you.

We have property tax here it's called council tax

TheCyclingProgrammer

We have property tax here it's called council tax

Except it's not a property tax, it just happens to be based on the rateable value of your house. You pay council tax regardless of whether you own the property or not.

badmemory

I do hope that your employer continues to contribute even if you don't & they do seem to give a lot. Otherwise you are making a massive mistake. Come back in a years time & I am prepared to bet you don't have that in savings.

If your employer doesn't contribute now then I am sure they are delighted that you have chosen to vote for a pay cut.

Incidentally, once you are paying tax (unless you earn an lot) then for every £1 you earn you pay 20p in income tax & 12p NI.

qwert_yuiop

kmb500 wrote: »

We have property tax here it's called council tax

$10,000 on an ordinary house? It’s one of the reasons why so many Americans live in trailers.