Tax Thresholds - Flexible?

MrMoff

Hi everyone, hope someone can help me on a Tax Allowance and Threshold query.

I ask this as a lot of information I seek on this matter states that I get taxed at 20% on the first £37700 over my PTA.

However, If my personal allowance increases does it mean that my higher tax bracket increases???

Or is it the case that I get taxed at 20% up to the 40% figure(£50,270) irrespective of my PTA?

Example 1 - My PTA is £16,500
I would then pay 20% tax on £33,770 (£50,270-£16500)
and then 40% on anything over £50,270

Or is it this 

Example 2 - My PTA is £16,500
I would then pay 20% Tax on the first £37700
An therefore my 40% liability does not start until £54,200 ?? (PTA+£37,700)

Many thanks in Advance.

Moff

eskbanker

Personal tax allowances don't get increased above the standard figure, so the question is moot - there are various allowances and reliefs that may reduce tax liability, but the PTA itself doesn't change, so you'd need to clarify your scenario in more detail in order to determine potential tax liabilities....

MrMoff

eskbanker said:

Personal tax allowances don't get increased above the standard figure, so the question is moot - there are various allowances and reliefs that may reduce tax liability, but the PTA itself doesn't change, so you'd need to clarify your scenario in more detail in order to determine potential tax liabilities....

Thank for the reply.

The way I read for estimate is that the Standard Personal Allowance does change, I say this because for a number of years now I have claimed Marriage transfer Allowance ( this year it is £1,260) and therefore my Personal Allowance is not the standard £12,570 but £13,830

armistice

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

MrMoff

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

armistice

MrMoff said:

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

Well, that is what the gov do,    Income Tax rates and allowances for current and previous tax years - GOV.UK (www.gov.uk)

Its the media that translate it to what most people have (Just the standard PA with no extra allowances). I guess, in order to make it simpler for people (Who in general probably don't really care about the detail) to understand.  

amanda1024

MrMoff said:

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

They do: https://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

But for the majority of people, their personal allowance is £12,570, so the £50,270 figure is the relevant figure for comparing salary etc. against.

eskbanker

MrMoff said:

eskbanker said:

Personal tax allowances don't get increased above the standard figure, so the question is moot - there are various allowances and reliefs that may reduce tax liability, but the PTA itself doesn't change, so you'd need to clarify your scenario in more detail in order to determine potential tax liabilities....

Thank for the reply.

The way I read for estimate is that the Standard Personal Allowance does change, I say this because for a number of years now I have claimed Marriage transfer Allowance ( this year it is £1,260) and therefore my Personal Allowance is not the standard £12,570 but £13,830

No, that's not how it actually works - the personal allowance itself remains at £12,570, and you also have a tax credit of the £1,260.

MrMoff

amanda1024 said:

MrMoff said:

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

They do: htts://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

But for the majority of people, their personal allowance is £12,570, so the £50,270 figure is the relevant figure for comparing salary etc. against.

Thank you Amanda, I see that now.

I am correct in the following Example then?

Example 3 - My PTA is only £9,500 ( maybe reduced due to owning them from a previous year)
I would then pay 20% Tax on the first £37700
And therefore my 40% liability actually starts at £47,200 (PTA+£37,700)

BoGoF

MrMoff said:

amanda1024 said:

MrMoff said:

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

They do: htts://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

But for the majority of people, their personal allowance is £12,570, so the £50,270 figure is the relevant figure for comparing salary etc. against.

Thank you Amanda, I see that now.

I am correct in the following Example then?

Example 3 - My PTA is only £9,500 ( maybe reduced due to owning them from a previous year)
I would then pay 20% Tax on the first £37700
And therefore my 40% liability actually starts at £47,200 (PTA+£37,700)

No. You are confusing your tax code and your personal allowance. 

MrMoff

BoGoF said:

MrMoff said:

amanda1024 said:

MrMoff said:

armistice said:

The tax bands are defined based on 'Income after allowances' 
The standard PA is currently £12,570 , but you may have additional allowances that increase your total allowance'.  

From your example, option 2 is correct.

Many Thanks Armistice,

I think therefore the £50,270 figure is very misleading don't you?
Why don't they just all say that its 20% on the first £37700 after PTA and then 40% there afters??

They do: htts://www.gov.uk/government/publications/rates-and-allowances-income-tax/income-tax-rates-and-allowances-current-and-past#tax-rates-and-bands

But for the majority of people, their personal allowance is £12,570, so the £50,270 figure is the relevant figure for comparing salary etc. against.

Thank you Amanda, I see that now.

I am correct in the following Example then?

Example 3 - My PTA is only £9,500 ( maybe reduced due to owning them from a previous year)
I would then pay 20% Tax on the first £37700
And therefore my 40% liability actually starts at £47,200 (PTA+£37,700)

No. You are confusing your tax code and your personal allowance. 

Sorry BoGoF, how do you mean?