Tax on Overtime

tekie

I'm in a permanent job and get one Saturday a month as OT, but I had the option to do 3 Saturdays this month, and all my colleagues are saying that the money from the 3rd Saturday will all be taxed and there is no point in doing more than 2 Saturdays, as this will be taxed at a high rate, etc. I'm earning less than 45k a year, and each Saturday pays me about £250. How do I check whether this is true or not?

Hoenir

You maybe temporarily taxed at a higher rate. Over the course of the tax year this will wash out though.  Overtime is never guaranteed. Personally I'd take it while available. You could always contribute more to your pension plan if you did end up paying 40% over the entire tax year. 

eskbanker

tekie said:

I'm in a permanent job and get one Saturday a month as OT, but I had the option to do 3 Saturdays this month, and all my colleagues are saying that the money from the 3rd Saturday will all be taxed and there is no point in doing more than 2 Saturdays, as this will be taxed at a high rate, etc. I'm earning less than 45k a year, and each Saturday pays me about £250. How do I check whether this is true or not?

You'd need to work out your total taxable income for the whole tax year to see if it takes you into higher rate or not, the threshold for which is less than £45K in Scotland, for example.

Edit: if, for the sake of argument, your base salary is exactly £45K (and you're not in Scotland and have no other taxable income), then 22 extra £250s would take you over the £50,270 threshold, so the odd extra Saturday wouldn't do so, but averaging two a month would, just.  It remains a value judgement regarding whether a net £200 is acceptable to you but £150 wouldn't be!

Dazed_and_C0nfused

tekie said:

I'm in a permanent job and get one Saturday a month as OT, but I had the option to do 3 Saturdays this month, and all my colleagues are saying that the money from the 3rd Saturday will all be taxed and there is no point in doing more than 2 Saturdays, as this will be taxed at a high rate, etc. I'm earning less than 45k a year, and each Saturday pays me about £250. How do I check whether this is true or not?

If you are working full time then the money from the first Saturday will all be taxed.  And the second Saturday.  And the third.

You might temporarily tip into higher rate territory (taxable pay above £12,567 by month 3 of the tax year) but as @Hoenir explained it all becomes out in the wash over the course of the year.

molerat

Your choice to take home 100% of £0 or between 72% and 58% of £250

Albermarle

You could always contribute more to your pension plan if you did end up paying 40% over the entire tax year. 

OP - Presume you are already paying into a pension plan already? If so then you will be able to recoup/avoid some 40% tax ( or at least have it going back into your pension) even if your total income goes above £50270.

As said above you could always increase your pension contributions, if your income goes a bit higher still.
40% tax relief is very generous and a good way to boost your pension pot. Maybe then you can retire early !