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

polymaff

01afraser4 wrote: »

Or am I missing something?

No you aren't, but the OP seems to be into bluster and ranting - not logic.

csgohan4

polymaff wrote: »

No you aren't, but the OP seems to be into bluster and ranting - not logic.

Op do a SOA and post in the debt free wannabee forum to reduce your outgoings. When you earn more, you also want to spend more, that is what alot of people do

EdSwippet

01afraser4 wrote: »

Or am I missing something?

Probably not, although there are actually circumstances where a tax rate above 100% is possible. For example, this in the NHS pension scheme:

66. Employees are facing significantly higher marginal tax rates once pension tax charges are factored in and large pay rises can sometimes lead to very little increase in take-home pay. This effect is well illustrated in the fortieth annual report by the review body on senior salaries. The review body noted that “for gross salaries between £118,000 and £170,000, take home pay increases by less than £3,000. Marginal tax rates above 100 per cent are experienced between £118,800 and £122,600, although this calculation does not factor in increases to the value of the pension. Such high marginal tax rates mean it could be rational for an individual to seek to work part-time rather than work full-time. ..."

polymaff

EdSwippet wrote: »

Probably not, although there are actually circumstances where a tax rate above 100% is possible. For example, this in the NHS pension scheme:

But the quote you post is nonsense. It confuses income tax rate, take-home pay and accrued benefit. In a true like-for-like comparison no-one will benefit by less than £3,000 when the salary is raised by £52,000 - due to income tax.

EdSwippet

polymaff wrote: »

But the quote you post is nonsense. It confuses income tax rate, take-home pay and accrued benefit. In a true like-for-like comparison no-one will benefit by less than £3,000 when the salary is raised by £52,000 - due to income tax.

You can certainly argue that there is a net benefit here, because of the future uplift in pension payments. However, it is also factually true that the current marginal tax rate is pushed above 100%. And the certainty of higher marginal tax rates now will tend to drive behaviour far more than the uncertainty of future benefits.

btcp

When I got a pay raise in the middle of the year, I started to get monthly net lower than before my pay raise. I assume this is because the tax calculated upfront based on the current amount, and when you get a pay raise you ended up underpaying tax. Of course it felt like I am getting less, while I hoped to get more after my raise. If I sum up an annual income, I end up getting more but not in the same proportion. My gross salary was increased by 25% while take home by 15%. That’s annoying.

chrisbur

btcp wrote: »

When I got a pay raise in the middle of the year, I started to get monthly net lower than before my pay raise. I assume this is because the tax calculated upfront based on the current amount, and when you get a pay raise you ended up underpaying tax. Of course it felt like I am getting less, while I hoped to get more after my raise. If I sum up an annual income, I end up getting more but not in the same proportion. My gross salary was increased by 25% while take home by 15%. That’s annoying.

If your net went down after getting a pay rise then something happened other than the pay rise. If you want an explanation you need to give details from last pay day before increase and first after
Taxable gross
Tax paid
Tax code/basis
Taxable gross to date
Tax paid to date
Week/month number

Regarding your percentages for a pay increase this is because your pay increase had tax/NI deducted from all of the increase while the pre-increase part had allowances for which no tax or NI was paid.

chrisbur

AmWk wrote: »

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!

Does seem strange may be an explanation though cannot think of one at the moment. To look into it would need the figures like those given in your first post.

polymaff

EdSwippet wrote: »

You can certainly argue that there is a net benefit here, because of the future uplift in pension payments. However, it is also factually true that the current marginal tax rate is pushed above 100%. And the certainty of higher marginal tax rates now will tend to drive behaviour far more than the uncertainty of future benefits.

An example would be helpful - preferably based on those figures I quoted from your quotation. Without such the quotation is dubious nonsense.

I'm not saying that 100%+ incremental tax rates don't exist. A good example is when one earns the extra pound which tips the PSA from £1,000 to £500.

btcp

chrisbur wrote: »

If your net went down after getting a pay rise then something happened other than the pay rise. If you want an explanation you need to give details from last pay day before increase and first after
Taxable gross
Tax paid
Tax code/basis
Taxable gross to date
Tax paid to date
Week/month number
.

Sure, thank in advance!
July
Earnings 6997.89
Tax 1829
Net 4622.01
Tax code 1185L
Taxable to date 40450.61
Tax to date 12298.80

August pay raise
Earnings 7572.72
Tax 2059
Net 4955.35
Tax code 1185L
Taxable to date 48023.33
Tax to date 14357.80

September bonus
Earnings 11037.86
Tax 3993.8
Net 6416.38
Tax code K461 M1
Taxable to date 59061.19
Tax to date 18351.60

From October tax code is as per September and I get less net than in July - 4448.73