40% tax bracket

mpaterson18

Hi, I might be about to get a job offer that would raise my salary from £46000 to £51000. Would this push me into the 40% tax bracket? I don’t want to be worse off!

GrumpyDil

The 40% tax starts at £50,271 so you would potentially pay 40% tax on £729.00.

Dazed_and_C0nfused

mpaterson18 said:

Hi, I might be about to get a job offer that would raise my salary from £46000 to £51000. Would this push me into the 40% tax bracket? I don’t want to be worse off!

You will only pay 40% tax on the amount above the higher rate limit.  Which is £50,270 for everyone except Scottish residents.

If you currently receive Marriage Allowance then you may lose this but often a salary of £51,000 wouldn't actually make you a higher rate payer as pension contributions either reduce the amount of taxable income or increase your basic rate band meaning you don't actually pay any 40% tax.

Savvy_Sue

You could also increase your pension contributions to keep yourself below the limit. 

LeafGreen

Savvy_Sue said:

You could also increase your pension contributions to keep yourself below the limit. 

This is a really good idea if you have the option.

Also if you have savings keeping below the higher rate tax threshold would also mean your Personal Savings Allowance remains at £1000 rather than dropping to £500.

pjcox2005

GrumpyDil said:

The 40% tax starts at £50,271 so you would potentially pay 40% tax on £729.00.

This point is key, it's only 40% on the top amount.

If you use a salary calculator then £46k pays £35.3k after tax, where as a £51k salary pays £38.6k so over £3,000 better off over the course of the year. That's oversimplified as doesn't take into account tax codes, pension contributions etc, but you'll always be better off taking a higher salary (except potentially if you'd lose benefits).

lisyloo

The best thing to do is to put the extra into your pension and get the 40% back.
If you can afford to be without that money until 55 or 57.

penners324

You'll be better off with that pay rise not worse off.

40% rate doesn't apply to all of your earnings