Exceeding 20% tax threshold before the end of the year

LMS94 · 26 November 2018 at 11:45AM

Hey,

I'd like to get some advice regarding the tax brackets.

Currently I'm in 20% but I'm expected later in the year to exceed the 40% limit due to overtime / bonuses.

Will the amount of tax I pay get taken this year or will I get a bill next year?

Also, since my salary doesn't take me into the 40% bracket, will my tax code stay the same (20% bracket?)

Thanks

Berkshire_Beancounter · 26 November 2018 at 12:06PM

Assuming you're on PAYE, the amount of tax you pay should be taken this year.

Your tax code just tells your employer how much personal allowance you're entitled to, it doesn't tell them what tax bracket you are in. Your employer's payroll department works out tax each month based on your earnings to date, and tax paid to date.

If, on a cumulative basis, your income including bonuses, overtime and anything else, pushes you into the bracket at which you pay 40% tax, then your employer will deduct tax at 40% in that period, and you should end up paying the right amount of tax in the current year. There may be times when HMRC calculate you haven't paid enough tax, but often you can have your tax code adjusted to collect the tax in a subsequent year (or pay it in a lump sum if you do a tax return). Chances are, unless you have a 'week 1/ month 1' code, you will pay about the right amount of tax this year.

Your tax code should stay the same *, as it just tells the employer how much personal allowance to give you before they start calculating tax due.

* having said that, there may be times when your tax code does change due to income e.g. if you are in the lucky position of earning over £100k your personal allowance starts to get withdrawn and your tax code gets adjusted for this. If you have savings interest and/or dividend income which take you over the personal savings allowance / dividend allowance, your tax code may get adjusted to collect the extra tax due. But I'm trying to keep things simple! :-)