How much more tax?

sultan123

sultan123 said:

[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.

4k includes NI

mark1959

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

sultan123

mark1959 said:

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

agree that was my original question but now wanting to know how much extra tax I am paying in view of freeze for prolonged time

Dazed_and_C0nfused

sultan123 said:

mark1959 said:

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

agree that was my original question but now wanting to know how much extra tax I am paying in view of freeze for prolonged time

It's still the same answer, none.

sultan123

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

agree that was my original question but now wanting to know how much extra tax I am paying in view of freeze for prolonged time

It's still the same answer, none.

But each year the PA would have gone up saving me some money each tax year. Surely with a freeze on PA, I lose out?

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

agree that was my original question but now wanting to know how much extra tax I am paying in view of freeze for prolonged time

It's still the same answer, none.

But each year the PA would have gone up saving me some money each tax year. Surely with a freeze on PA, I lose out?

That's a different question though!

sultan123

Dazed_and_C0nfused said:

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

That's not what you asked originally is it.
"Will i pay more tax if the threshold remains the same on my £95,000"
No. [still the same]

agree that was my original question but now wanting to know how much extra tax I am paying in view of freeze for prolonged time

It's still the same answer, none.

But each year the PA would have gone up saving me some money each tax year. Surely with a freeze on PA, I lose out?

That's a different question though!

Yes apologies. This is the main question in my mind now, anyway I can figure out answer?

Jeremy535897

I answered it earlier:
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

Jeremy535897 said:

I answered it earlier:
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.

Thanks so how would this look like for a salary of 95k?

Jeremy535897

On a salary of £95,000 a tax calculator shows take home pay of £63,716, assuming no pension contributions. If your net pay stays the same, and inflation is 10%, and you spend it all, you would be short by £6,372.

If your employer puts your pay up to £104,500 (10% increase) and tax and NI rates don't change at all, the tax calculator shows take home pay of £68,286, but you need £63,716 + £6,372 = £70,088, so would be short by £1,802.

In reality, there would be pension contributions to factor in, you might save some of your income, not everything you buy will go up by 10%, and tax/NI rates aren't going to be precisely the same.