How much more tax?

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

No, it's for vast majority of people who do get a pay rise each year, however small.

If you earn £95k and get a pay rise of £5k you will pay more tax (and NI) as you have an extra £5k income.  Even if the Personal Allowance and basic rate band increased for inflation you would still pay more tax as £5k extra income would almost certainly be more than any increase in the Personal Allowance or basic rate band.

If you earn £12,000, have no other income and pay no tax but get a 10% pay rise you will start paying some tax.

but why would it be that much more? the extra 5k would be taxed at 40% right?

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

No, it's for vast majority of people who do get a pay rise each year, however small.

If you earn £95k and get a pay rise of £5k you will pay more tax (and NI) as you have an extra £5k income.  Even if the Personal Allowance and basic rate band increased for inflation you would still pay more tax as £5k extra income would almost certainly be more than any increase in the Personal Allowance or basic rate band.

If you earn £12,000, have no other income and pay no tax but get a 10% pay rise you will start paying some tax.

but why would it be that much more? the extra 5k would be taxed at 40% right?

Keeping 60% of £5k would be nice.  But it's still a fact that you will have paid more tax than if you earned £95k.

I'm not sure what you're trying to achieve with these questions.  If you earn above the Personal Allowance and start earning more you will pay more tax.  Simple maths.

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

No, it's for vast majority of people who do get a pay rise each year, however small.

If you earn £95k and get a pay rise of £5k you will pay more tax (and NI) as you have an extra £5k income.  Even if the Personal Allowance and basic rate band increased for inflation you would still pay more tax as £5k extra income would almost certainly be more than any increase in the Personal Allowance or basic rate band.

If you earn £12,000, have no other income and pay no tax but get a 10% pay rise you will start paying some tax.

but why would it be that much more? the extra 5k would be taxed at 40% right?

Keeping 60% of £5k would be nice.  But it's still a fact that you will have paid more tax than if you earned £95k.

I'm not sure what you're trying to achieve with these questions.  If you earn above the Personal Allowance and start earning more you will pay more tax.  Simple maths.

Just trying to understand who actually loses out more due to the income tax freeze. Is it the ones who pay no tax or the one ones who finallly end up in 50k salary? 

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

No, it's for vast majority of people who do get a pay rise each year, however small.

If you earn £95k and get a pay rise of £5k you will pay more tax (and NI) as you have an extra £5k income.  Even if the Personal Allowance and basic rate band increased for inflation you would still pay more tax as £5k extra income would almost certainly be more than any increase in the Personal Allowance or basic rate band.

If you earn £12,000, have no other income and pay no tax but get a 10% pay rise you will start paying some tax.

but why would it be that much more? the extra 5k would be taxed at 40% right?

Keeping 60% of £5k would be nice.  But it's still a fact that you will have paid more tax than if you earned £95k.

I'm not sure what you're trying to achieve with these questions.  If you earn above the Personal Allowance and start earning more you will pay more tax.  Simple maths.

Just trying to understand who actually loses out more due to the income tax freeze. Is it the ones who pay no tax or the one ones who finallly end up in 50k salary? 

No one loses out.

But if your pay increases whilst tax allowances and rate bands remain the same you will pay more tax.  Simply because you have more income to be taxed.

The only exception would be very low earners who don't earn enough to pay tax before or after a pay rise.

Same with pensioners.

Jeremy535897

It's not just an issue about rates of tax as such. If you earn £32,570, after deducting the personal allowance, you pay tax on £20,000 at 20% = £4,000, leaving you £28,570 (ignoring NIC). If there is 10% inflation over the year, you would hope your take home wage would go up to £28,750 plus £2,875 = £31,625. But if your gross wage goes up 10% to £32,750 + £3,275 = £36,025, and tax allowances don't increase, you pay tax of £36,025 - £12,570 = £23,455 x 20% = £4,691, leaving you only £31,334 in your pocket rather than £31,625. This is fiscal drag. If this pay increase puts you into a higher rate of tax, you are even further behind.

sultan123

I know it is the Sun but does the following show correct rate of extra tax paid over the next few years based on salary?

https://www.thesun.co.uk/money/14230075/income-tax-freeze-affect-wages/amp/

[Deleted User]

sultan123 said:

I know it is the Sun but does the following show correct rate of extra tax paid over the next few years based on salary?

https://www.thesun.co.uk/money/14230075/income-tax-freeze-affect-wages/amp/

No - that article is from March 2021 and discusses how much one was affected by the decision to freeze personal allowances as opposed to what was originally promised. Not relevant.

‘The table below shows how much you'll lose out based on what the government had previously promised.’

sultan123

[Deleted User] said:

sultan123 said:

I know it is the Sun but does the following show correct rate of extra tax paid over the next few years based on salary?

https://www.thesun.co.uk/money/14230075/income-tax-freeze-affect-wages/amp/

No - that article is from March 2021 and discusses how much one was affected by the decision to freeze personal allowances as opposed to what was originally promised. Not relevant.

‘The table below shows how much you'll lose out based on what the government had previously promised.’

but it accounts for the freeze of PA. So surely someone would be 3k worse off earning 80k vs if PA was not frozen

[Deleted User]

sultan123 said:

[Deleted User] said:

sultan123 said:

I know it is the Sun but does the following show correct rate of extra tax paid over the next few years based on salary?

https://www.thesun.co.uk/money/14230075/income-tax-freeze-affect-wages/amp/

No - that article is from March 2021 and discusses how much one was affected by the decision to freeze personal allowances as opposed to what was originally promised. Not relevant.

‘The table below shows how much you'll lose out based on what the government had previously promised.’

but it accounts for the freeze of PA. So surely someone would be 3k worse off earning 80k vs if PA was not frozen

The government originally said they weren’t going to freeze allowances and then, in 2021, they did. That chart shows the cost of that decision - comparing the effect of freezing them against not freezing them. 

I suspect that you are aware of this.

sultan123

[Deleted User] said:

sultan123 said:

[Deleted User] said:

sultan123 said:

I know it is the Sun but does the following show correct rate of extra tax paid over the next few years based on salary?

https://www.thesun.co.uk/money/14230075/income-tax-freeze-affect-wages/amp/

No - that article is from March 2021 and discusses how much one was affected by the decision to freeze personal allowances as opposed to what was originally promised. Not relevant.

‘The table below shows how much you'll lose out based on what the government had previously promised.’

but it accounts for the freeze of PA. So surely someone would be 3k worse off earning 80k vs if PA was not frozen

The government originally said they weren’t going to freeze allowances and then, in 2021, they did. That chart shows the cost of that decision - comparing the effect of freezing them against not freezing them. 

I suspect that you are aware of this.

Yes that is what I have been wanting to know. How much worse off is one due to the freeze vs not agaisnt the freeze. 

So Sun figures seem accurate then, if you earn 95k guess you are paying 4k more tax over 5 years vs without the freeze.