Will I pay higher tax amount?

momo12

Hi, I have been offered a pay increase from £41,000 to £45,000 and I'm trying to figure out if it will place me in the higher tax bracket - I live in Scotland.

My current tax code is S1369M as I am benefiting from the marriage tax allowance but I believe I won't be entitled to that because I have gone over the income threshold.

Could someone help me understand if I will be put in the higher tax code or not please?

Many thanks

Caz3121

what will your income be in the current tax year? (x months @ £41k salary + y months @ £45k salary)

momo12

Hi,

I've been on £41k since April 2019, will be on £45k until April 2020. Hope that answers your question?

Dazed_and_confused

but I believe I won't be entitled to that because I have gone over the income threshold

Their is no "income threshold" for Marriage Allowance. In some situations you could be earning £100k and still be eligible. It is what tax rate you are liable at that matters.

If your annual taxable salary was £41k for say 9 months and £45k for 3 months them that is only actually £42k/year.

Which is well under the Scottish higher rate threshold of £43,430 however you need to remember to include any other taxable income you have. Company benefits, interest, dividends etc.

The position for 2020:21 will depend on what the UK and Scottish government decide in their respective budgets.

unholyangel

Also remember your salary may not be your Adjusted Net Income (ANI) - which is what your tax is actually calculated on.

Your ANI can be affected by pension contributions, benefits in kind, bonus/commission etc.

My main point to this was that next year if you were on a 45k salary, even with 5% pension contributions it would take you below the higher rate in scotland. Although benefits in kind could take you back up over it.

Dazed_and_confused

Adjusted net income really isn't used to calculate your tax liability.

It is just used to determine your

Personal Allowance
Married Couple's Allowance
High Income Child Benefit Charge

unholyangel

Dazed_and_confused wrote: »

Adjusted net income really isn't used to calculate your tax liability.

It is just used to determine your

Personal Allowance
Married Couple's Allowance
High Income Child Benefit Charge

http://www.legislation.gov.uk/ukpga/2007/3/section/23

Dazed_and_confused

The link refers to total income and net income but no mention of adjusted net income.

unholyangel

Dazed_and_confused wrote: »

The link refers to total income and net income but no mention of adjusted net income.

The adjusted was likely added by the gov to stop people thinking it was their tax home pay that determined their liability. Although its entirely supposition on my part.

Steps 1 & 2 are the calculation for determining ANI (although I admit, it doesn't break it down in detail to explain whats involved in each step). The subsequent steps are the calculation for the tax liability - which is based on the result of steps 1 & 2 (the ANI).

Dazed_and_confused

Adjusted net income takes account of, amongst other things, gift aid and pension contributions.

So if you had say taxable income of £110,000 and made charitable donations of £12,000 via gift aid your adjusted net income would be £98,000 and full Personal Allowance would be due. But your tax liability would be calculated on the taxable income of £110,000.