Reach 40% threshold with last monthly pay?

MikMikandThriceMik

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 
Does my tax code go back to 1257L like it is now?
Asking because I am retiring end of March due to ill health and don't want to be in the 40% tax bracket cos my pension will be quite small.
Thank you.

Dazed_and_C0nfused

MikMikandThriceMik said:

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 
Does my tax code go back to 1257L like it is now?
Asking because I am retiring end of March due to ill health and don't want to be in the 40% tax bracket cos my pension will be quite small.
Thank you.

What has your tax code for 2024-25 been changed to?

From April you will get the basic rate band for 2024+25, spread across the year.

How much do you expect to earn in the month to 5 May?

MikMikandThriceMik

Dazed_and_C0nfused said:

MikMikandThriceMik said:

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 
Does my tax code go back to 1257L like it is now?
Asking because I am retiring end of March due to ill health and don't want to be in the 40% tax bracket cos my pension will be quite small.
Thank you.

What has your tax code for 2024-25 been changed to?

From April you will get the basic rate band for 2024+25, spread across the year.

How much do you expect to earn in the month to 5 May?

How do I find out what my tax code is for 24-25?

April paycheck will be 3400 gross.

kimwp

What will your tax code change to when you go over the 40% threshold? 

If you are a PAYE employee, it shouldn't change, it just means that you will pay 40% tax on the amount you earn in that year over the threshold.

[Deleted User]

MikMikandThriceMik said:

Dazed_and_C0nfused said:

MikMikandThriceMik said:

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 
Does my tax code go back to 1257L like it is now?
Asking because I am retiring end of March due to ill health and don't want to be in the 40% tax bracket cos my pension will be quite small.
Thank you.

What has your tax code for 2024-25 been changed to?

From April you will get the basic rate band for 2024+25, spread across the year.

How much do you expect to earn in the month to 5 May?

How do I find out what my tax code is for 24-25?

April paycheck will be 3400 gross.

If you do slip into higher rate tax on March as, presumably, you will have had taxable earnings of over 50270 by that date, there is no reason why your code should not benefit from the full personal allowance in 2024/25. 

I am confused because, in your first post you stated that you would be retiring at the end of March but now states that your earnings in April will be £3400. 

MikMikandThriceMik

Thank you.
Looking  at Gov website they say my tax code for next year will be 1257L also.
Hopefully it will be that although pension provider says my first pension income will be taxed at 40% until HMRC tell them the real tax code.

It's going to be a hell of a shock going to less than 40% of my salary but this tinnitus is just not letting me sleep well or long enough. I can't do my job cos I am so tired and stressed, which is then not letting me sleep well or long enough. Vicious circle.

MikMikandThriceMik

[Deleted User] said:

MikMikandThriceMik said:

Dazed_and_C0nfused said:

MikMikandThriceMik said:

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 
Does my tax code go back to 1257L like it is now?
Asking because I am retiring end of March due to ill health and don't want to be in the 40% tax bracket cos my pension will be quite small.
Thank you.

What has your tax code for 2024-25 been changed to?

From April you will get the basic rate band for 2024+25, spread across the year.

How much do you expect to earn in the month to 5 May?

How do I find out what my tax code is for 24-25?

April paycheck will be 3400 gross.

If you do slip into higher rate tax on March as, presumably, you will have had taxable earnings of over 50270 by that date, there is no reason why your code should not benefit from the full personal allowance in 2024/25. 

I am confused because, in your first post you stated that you would be retiring at the end of March but now states that your earnings in April will be £3400. 

Sorry, it will either March or April.
The way I have calculated my spreadsheet linked in my post in the pension forum, if I have got my calculations correct, taking a small income from my pension, means I can work April, retire then and I will still not breach the 1257L threshold to be taxed at all next year.

[Deleted User]

MikMikandThriceMik said:

Thank you.
Looking  at Gov website they say my tax code for next year will be 1257L also.
Hopefully it will be that although pension provider says my first pension income will be taxed at 40% until HMRC tell them the real tax code.

It's going to be a hell of a shock going to less than 40% of my salary but this tinnitus is just not letting me sleep well or long enough. I can't do my job cos I am so tired and stressed, which is then not letting me sleep well or long enough. Vicious circle.

Log into your personal tax account shortly after you retire from your employment. You indicate that the employment has ceased and correct the expected income from that source to be zero for 2024/25. 

Why would the pension be taxed at 40%? The provider would have to receive a code (D0) to operate that and codes for 2024/25 are not issued to providers until mid-March. 

Flugelhorn

your tax code essentially looks the same if you are a 40% tax payer, all the code is indicating is the tax-free amount. You may have an emergency code with the pensions provider until they have their specific code from HMRC. You have the 1275L but for all they know you may have several jobs and the code can only be applied one of them and it may not be them.

I took my pension was was still working and had separate codes for the pension and jobs with  only one of them having the tax free allowance 

MikMikandThriceMik

[Deleted User] said:

MikMikandThriceMik said:

Thank you.
Looking  at Gov website they say my tax code for next year will be 1257L also.
Hopefully it will be that although pension provider says my first pension income will be taxed at 40% until HMRC tell them the real tax code.

It's going to be a hell of a shock going to less than 40% of my salary but this tinnitus is just not letting me sleep well or long enough. I can't do my job cos I am so tired and stressed, which is then not letting me sleep well or long enough. Vicious circle.

Log into your personal tax account shortly after you retire from your employment. You indicate that the employment has ceased and correct the expected income from that source to be zero for 2024/25. 

Why would the pension be taxed at 40%? The provider would have to receive a code (D0) to operate that and codes for 2024/25 are not issued to providers until mid-March. 

I don't know, maybe I told the person from the pension company that  I was retiring in April and that's why.

Thank you all so very much for your knowledge and replies. Keep them coming if I could benefit more from your expertise. 
Also, if you fancy doing a bit of checking over my sheet, it is in this post as the bottom link to Google docs, but I have also put the link in here below.
https://forums.moneysavingexpert.com/discussion/6502402/small-lump-sums-from-drawdown/p3

https://docs.google.com/spreadsheets/d/1sE49yTNOSVpBik5uZ8ie886TIyItE-_rYNNJIHIG3Sk/edit?usp=sharing

Grumpy_chap

MikMikandThriceMik said:

If I reach the threshold to be taxed at 40% with my last monthly salary this year, what happens in April? 

Even if your gross earnings trip into the higher rate band in the final month of the year, your total income might still be below once factors such as pension contributions are considered.

If you plan to retire very quickly, and assuming you have available allowance remaining, it may be worth making extra pension payments as you get the to-up on putting the money in and can then draw down with 25% tax free (subject to limits).  I assume you are of the age where drawing pension is permitted under standard rules.