Higher Tax Rate at 40k ?

Dazed_and_C0nfused

Heytheremrblue said:

I’ve just received a letter from HMRC saying my tax code has changed but on the notes it says …. If your total income and taxable state benefits for the year are more than your tax free amount then you will pay as follows : 20% up to £37700 and 40% between £37701 and £125140…… I thought the 40% tax rate kicked in at 50k ? If that’s the case I might as well retire now !

Those figures will be being quoted because that is how PAYE and payroll software works.

An employer or pension payer gets a tax code from HMRC and then operates that code using the tax tables HMRC provide.

Any adjustments for things like Gift Aid are incorporated into the tax code and the standard basic rate band* is always allowed when the tax is calculated after taking into account tax code allowances

*except for Scottish residents where different rate bands apply.

Heytheremrblue

BreakingGlass said:

Heytheremrblue said:

I’ve just received a letter from HMRC saying my tax code has changed but on the notes it says …. If your total income and taxable state benefits for the year are more than your tax free amount then you will pay as follows : 20% up to £37700 and 40% between £37701 and £125140…… I thought the 40% tax rate kicked in at 50k ? If that’s the case I might as well retire now !

Do you earn over £125k?

From HMRC site:

Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000. This means your allowance is zero if your income is £125,140 or above.

  Yes in a parallel dimension 3 removed.