Help! 60% Tax, I am sure everyone pays 40%

AmWk

Hello all,
Need help ASAP

Firstly please accept my apologies about my ignorance when it comes to TAX.
This is what HMRC sent me for 2017/18

Pay from employments £120,089.00
plus benefits and expenses received £903.00
Dividends from foreign companies £681.00
Interest from UK banks, building societies and securities etc £26.00
Total income received £121,699.00
minus
Payments into a retirement annuity contract etc. £3,494.00
Reduced Personal Allowance £2,400.00
Total £5,894.00
Total income on which tax is due £115,805.00

Basic rate £33,504.00 x 20% £6,700.80
Higher rate £81,594.00 x 40% £32,637.60
Savings interest from banks or building societies, securities etc.
Starting rate £0.00 x 0% £0.00
Nil rate £26.00 x 0% £0.00
Basic rate £0.00 x 20% £0.00
Dividends from companies etc
Warning: The level of investment income declared appears to be low in comparison to "Total income
received". Ensure that all income arising in the year, including dividends and interest, is included in the
Return.

Amount Percentage Total
Higher rate at nil rate £681.00 x 0% £0.00
Total income on which tax has been charged £115,805.00
Income Tax due £39,338.40
minus Tax deducted
From all employments, UK pensions and state benefits £36,528.00
Total tax deducted £36,528.00
Total Income Tax due £2,810.40

I had more money in my pocket in 2016/17 than 2017/18 and yes I get more-than the average salary but I have so many dependents so my out going is far too much.
I need to know what I can do retrospectively as well as for 2018/19.

Your help is greatly appreciated
.

BakingC

Where is your 60% tax? £39k tax on £116k is 33% average.

If you want to reduce your tax liability then increase your pension contributions.

Also something many high earners do if they are employed (not that I agree with it as it reduces tax revenue) is incorporate and invoice your employer as you end up paying corporation tax and dividend tax rather than personal income tax so high earners tend to be better off

csgohan4

BakingC wrote: »

Where is your 60% tax? £39k tax on £116k is 33% average.

If you want to reduce your tax liability then increase your pension contributions.

Also something many high earners do if they are employed (not that I agree with it as it reduces tax revenue) is incorporate and invoice your employer as you end up paying corporation tax and dividend tax rather than personal income tax so high earners tend to be better off

Depends if they within or out of IR35, the dividend route is no longer lucrative with tax being put in depending on if your higher tax payer or not after 2k.


You still need to pay NI tax both employer and employee. The gap has certainly shortened between LTD and employed.

uknick

AmWk, if you need all your post tax income to pay for your lifestyle/family commitments, then surely it's a moot point about avoiding tax at the higher rates if you've not got any disposable income left.?

TheCyclingProgrammer

BakingC wrote: »

Also something many high earners do if they are employed (not that I agree with it as it reduces tax revenue) is incorporate and invoice your employer as you end up paying corporation tax and dividend tax rather than personal income tax so high earners tend to be better off

Doing this would very likely make you caught by IR35 and would save you nothing. IR35 was designed to stop people doing exactly this.

agrinnall

It seems ridiculous when your salary is so high but if your outgoings are higher than your income I'd suggest that you post on the Debt Free Wannabe board for advice - I believe they are quite kind there, whereas on here we're more likely to think you are a spendthrift who should exercise a bit more self control.

polymaff

Help! 60% Tax, I am sure everyone pays 40%

The first point is a gimmick - do you understand it ?

As for the second, nonsense, point there are many, many who don't pay 40% - and live quite comfortably within their income.

gingerscot

AmWk wrote: »

Basic rate £33,504.00 x 20% £6,700.80
Higher rate £81,594.00 x 40% £32,637.60
.

I'm not sure where you get 60% from? You can't simply add 20% to 40%..

You are getting taxed at 20% for some of your income (~11-46K) and 40% for another (over ~46K). Just like everyone else that earns such an amount.

The average tax paid overall will be lower (~33% as a previous poster calculated).

Cheers,

chrisbur

gingerscot wrote: »

I'm not sure where you get 60% from? You can't simply add 20% to 40%..

You are getting taxed at 20% for some of your income (~11-46K) and 40% for another (over ~46K). Just like everyone else that earns such an amount.

The average tax paid overall will be lower (~33% as a previous poster calculated).

Cheers,

The OP is referring to the fact that when your taxable gross goes over £100,000 you start to loose your personnel allowance; so when this is added to the 40% tax you pay it results in any pay over that figure having in effect 60% deducted as tax.

AmWk

Many thanks for all the response tho some are as ignorant as I am and when they can NOT add value they should keep quite than .....
Secondly I do hope at the very least it has educated and was talking point.
I just want to touch a couple of things
1) Just because some of us are lucky enough to earn more than the average it doesn't mean we don't have dependents who are sick and require all sorts.... so before assuming best to ask not that I need to justify my self.
2) For those who don't know much about the 60% please do read above it has been explained very well.
3) By no means am I trying to avoid having to pay tax. I understand and accept it is my obligation and I do it happily, but I should pay like most and not more or less! Like I said I had more money in my pocket when I was earning 99K than now and it just didn't make sense to me hence why I put the question in here. Just so you all know I am privileged enough to EARN this kind of salary and I have worked for it so I DO NOT APOLOGIAS for it.
I hope this is the last I say about it.

For those who were constructive I deeply appreciate your help and THANK YOU!!!!!!!!

01afraser4

AmWk wrote: »

Many thanks for all the response tho some are as ignorant as I am and when they can NOT add value they should keep quite than .....
Secondly I do hope at the very least it has educated and was talking point.
I just want to touch a couple of things
1) Just because some of us are lucky enough to earn more than the average it doesn't mean we don't have dependents who are sick and require all sorts.... so before assuming best to ask not that I need to justify my self.
2) For those who don't know much about the 60% please do read above it has been explained very well.
3) By no means am I trying to avoid having to pay tax. I understand and accept it is my obligation and I do it happily, but I should pay like most and not more or less! Like I said I had more money in my pocket when I was earning 99K than now and it just didn't make sense to me hence why I put the question in here. Just so you all know I am privileged enough to EARN this kind of salary and I have worked for it so I DO NOT APOLOGIAS for it.
I hope this is the last I say about it.

For those who were constructive I deeply appreciate your help and THANK YOU!!!!!!!!

This is what is confusing me. The more you earn, the more money you have in your pocket regardless of what tax is deducted. Income Tax thresholds and rates are designed that way.

In your example you mentioned that you had more money in your pocket when earning 99K, so lets look at this in practice...

Total Income 16/17: £99,000
Minus Personal allowance (£11,000)
Total Income on which Tax is due £88,000

Basic rate £32,000 x 20% £6,400.00
Higher rate £56,000 x 40% £22,400
Total Tax due: £28,800

So, for 16/17, hypothetically the money in your pocket would be £70,200 (Total income received £99,000 - Total Tax due £28,800).

Compare this with 17/18 according to your figures, the money in your pocket would be £82,360 (Total income received £121,699 - Income Tax due £39,338.40).

Or am I missing something?