National insurance and tax

gadget88

So I use to pay very little NI and no tax but I’ve been caught up in fiscal drag. If I go from 24 hours to 16 hours I assume
I would only pay pension?  I believe tax free allowance is 12k and I’d be earning 10k? Currently get £15k so been caught up in tax. 

Dazed_and_C0nfused

gadget88 said:

So I use to pay very little NI and no tax but I’ve been caught up in fiscal drag. If I go from 24 hours to 16 hours I assume
I would only pay pension?  I believe tax free allowance is 12k and I’d be earning 10k? Currently get £15k so been caught up in tax. 

If your only taxable income in the current tax year is £10,000 then yes, you would not have any tax to pay.

Paying tax is quite normal though, you only lose 20% of the part of your income that is taxed, you keep the other 80%.  

Reducing your hours like that means you lose 100%!

kimwp

Tax goes to all the services we use- highways (pavements, roads), doctors, hospitals, libraries, pension etc. It's not a trap, it's contributing alongside everyone else who can contribute.

Grumpy_chap

gadget88 said:

So I use to pay very little NI and no tax but I’ve been caught up in fiscal drag. If I go from 24 hours to 16 hours I assume
I would only pay pension?  I believe tax free allowance is 12k and I’d be earning 10k? Currently get £15k so been caught up in tax. 

Can you afford to go from £15k to £10k just to avoid a small amount of tax?

Why not at least aim for £12.5k to get the most you can without incurring income tax liability?

Is there more to this question than simply tax?

LightFlare

The tax on 15k will be approx 500

Reducing you income by 5k to avoid paying this seems a bit counterproductive unless you have other means of income/finance and you are just working for something to do as opposed to fund living 

Keep_pedalling

LightFlare said:

The tax on 15k will be approx 500

Reducing you income by 5k to avoid paying this seems a bit counterproductive unless you have other means of income/finance and you are just working for something to do as opposed to fund living 

Apart from chucking away £4,500 to avoid paying £500 in income tax you would also be reducing your pension contributions making for a poorer retirement, your whole plan is bonkers. If you can afford to live with that amount less you would be better off plowing your excess income into building up a better pension.

gadget88

No the plan is for semi anyway and I'm getting inheritance money to help off set any loss of pay

Keep_pedalling

gadget88 said:

No the plan is for semi anyway and I'm getting inheritance money to help off set any loss of pay

Still a dumb plan as far as taxation is concerned. If you simply want to reduce your hours then fair enough.

la531983

Keep_pedalling said:

LightFlare said:

The tax on 15k will be approx 500

Reducing you income by 5k to avoid paying this seems a bit counterproductive unless you have other means of income/finance and you are just working for something to do as opposed to fund living 

Apart from chucking away £4,500 to avoid paying £500 in income tax you would also be reducing your pension contributions making for a poorer retirement, your whole plan is bonkers. 

Wouldn't be the first time on here, ive seen people suggest essentially the same to avoid going up to the 40% tax bracket, and stems from people not understanding the tax system properly (I.e. they think their whole salary would then be subject to the higher percentage, rather than just the bit over)

singhini

@gadget88

If you earn £15,000 a year you will pay:
£484.20 in income tax
£194.40 in NI tax
Take home will be £14,321.40p

You then open a SIPP (if you haven't already got one) and put £1,936 into it and the SIPP company will claim tax relief for you which will be £484 

Thus you have only paid 20p in income tax and £194.40p in NI tax

NOTE:
You earn £14,321  (which is more than the £10,000 you are considering) 
You invest £1,936 into your future (i.e. into your SIPP Pension)
You receive £484 tax relief which goes back into your pension
You live off £12,385   (£14,321 less £1,936) and £12,385 is more than the £10,000 your considering
You effectively still pay very little tax and don't need to worry about fiscal drag

singhini

Forgot to mention:

Now that you have £12,385, you have no excuses:  FEED  THE  BIRDS  (go to B&M and buy a 12kg bag of bird seed for £6.49 and feed them). The bag should last you about 2-4 weeks
Think good karma