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

AmWk

What you all are not getting is not only the tax is being deducted directly from my salary but also at the end of the year I am being asked to pay more money by HMRS. The good thing in all that was at least they didn't want me to pay it in one lump sum.
As far as Polymaff's comment me being in to "bluster and ranting"
1) I did say it didn't make much sense to me hence why I asked for help so I understand.....
2) If you can't understand things like me best to ask than to insult cos people come here in need of help if you and people like you keep throwing insults they will hesitate in sharing....
Just have manor of conduct it doesn't cost you anything. You may even learn something from the discussion
Thanks

EdSwippet

polymaff wrote: »

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

The full report from which the quotation is taken is here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/740064/Fortieth_Annual_Report_on_Senior_Salaries_2018.pdf

Pages 50 and 51 show the methodology and calculation of the tax rate climb to above 100%. If you disagree with it, it's going to be more productive to take it up with the Review Body on Senior Salaries rather than with me :-)

AmWk

I am none the wiser if I should have an other thread or just ask it here... So if one is to increase one's pension and the company is in " smart pension payments scheme " which is best pre tax or post tax.

01afraser4

AmWk wrote: »

What you all are not getting is not only the tax is being deducted directly from my salary but also at the end of the year I am being asked to pay more money by HMRS. The good thing in all that was at least they didn't want me to pay it in one lump sum.
As far as Polymaff's comment me being in to "bluster and ranting"
1) I did say it didn't make much sense to me hence why I asked for help so I understand.....
2) If you can't understand things like me best to ask than to insult cos people come here in need of help if you and people like you keep throwing insults they will hesitate in sharing....
Just have manor of conduct it doesn't cost you anything. You may even learn something from the discussion
Thanks

You have been asked to pay more tax through Self Assessment because not enough tax was deducted at source by your employer. This could be due to a number of reasons. Did you receive any bonus payments that were unexpected or paid at a higher rate than normal?

polymaff

EdSwippet wrote: »

The full report from which the quotation is taken is here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/740064/Fortieth_Annual_Report_on_Senior_Salaries_2018.pdf

Pages 50 and 51 show the methodology and calculation of the tax rate climb to above 100%. If you disagree with it, it's going to be more productive to take it up with the Review Body on Senior Salaries rather than with me :-)

Thanks for the link. I still regard it as dubious in that there is added benefit via the pension build-up. There is no such personal benefit for the OP - other than knowing that he is contributing to the welfare of our society and that this is the current state of the income tax system and so he is not being discriminated against.

chrisbur

btcp wrote: »

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

July to August your taxable gross went up by £575 and you paid an extra £230 in tax which is 40% the correct tax deduction for your level of earnings. There would also have been some extra NI and possibly pension so cannot check exact net figure but would assume this to be correct. Your net has increased by £333.34 as a result of this increase in pay.
Your net pay has definitely gone up from July to August not down.

The September pay has certainly gone down but this is due to your tax code being changed from 1185L to K461
This should be explained to you in a notice of coding from HMRC.
Possibly they have adjusted because you are going to go over the £100,000 limit for personnel allowance.

EdSwippet

polymaff wrote: »

Thanks for the link. I still regard it as dubious in that there is added benefit via the pension build-up.

The problem is that the future benefit is uncertain -- one might easily die before receiving it -- and distant, but the current year tax on it is both definite and immediate. This is a marginal tax rate above 100%, and decisions are made on margins.

You can of course regard it as 'dubious' if you wish -- perhaps a better word might be 'unconvincing'? -- but it would be a huge stretch from there to conclude that the way it operates has no negative real-world impact at all. Probably no connection to the OP's case, but nevertheless a concrete example of how poorly thought out pensions policy can give rise to perverse secondary effects by generating a tax rate in excess of 100%.

polymaff

EdSwippet wrote: »

The problem is that the future benefit is uncertain -- one might easily die before receiving it -- and distant, but the current year tax on it is both definite and immediate. This is a marginal tax rate above 100%, and decisions are made on margins.

You can of course regard it as 'dubious' if you wish -- perhaps a better word might be 'unconvincing'? -- but it would be a huge stretch from there to conclude that the way it operates has no negative real-world impact at all. Probably no connection to the OP's case, but nevertheless a concrete example of how poorly thought out pensions policy can give rise to perverse secondary effects by generating a tax rate in excess of 100%.

I could live with unconvincing.

I think the point is that the policy was that pensions should not become a means of salting away significant future benefit. This is one way of doing that and - after all - I suppose that the pension route is not mandatory meaning that the recipient has a method by which he could avoid that high rate. Not so the OP.

My sympathy is for the poor bod who only has, say, £25k taxable and yet ends up paying some tax at 40%.

The pension thing is debatable but the £25k case is an unforgiveable offence against fairness in taxation.

AmWk

01afraser4 wrote: »

You have been asked to pay more tax through Self Assessment because not enough tax was deducted at source by your employer. This could be due to a number of reasons. Did you receive any bonus payments that were unexpected or paid at a higher rate than normal?

Yes I did get a bonus it wasn't " unexpected " meaning I as well as the company out perform our target so I often get min 20K Bonus each year as for the other question I am none the wiser. May I add my bonus was TAXED 40% before it went in to my account.

btcp

chrisbur wrote: »

July to August your taxable gross went up by £575 and you paid an extra £230 in tax which is 40% the correct tax deduction for your level of earnings. There would also have been some extra NI and possibly pension so cannot check exact net figure but would assume this to be correct. Your net has increased by £333.34 as a result of this increase in pay.
Your net pay has definitely gone up from July to August not down.

The September pay has certainly gone down but this is due to your tax code being changed from 1185L to K461
This should be explained to you in a notice of coding from HMRC.
Possibly they have adjusted because you are going to go over the £100,000 limit for personnel allowance.

Yes, now looking at the numbers I realise it is not immediately after a pay raise I started to get a lower net. I understand my tax code has changed, what is unclear why so suddenly in September. Can they plan it in a more even way so I pay an equal amount monthly? This is what the note from HMRC says: tax code K shows that you have untaxed income which is more than your tax free allowance and needs to be added to your wages, salary or pension so the additional tax can be collected. This is not so simple to understand why it happens at that point of the year.