40% tax bracket 1st timer

Bugzy09

Hi Everyone

I've recently had a job promotion and will end up paying into the 40% tax bracket.
I'm struggling to understand what my take home would be in the months I go over.

So I earn 60K with bonus included so I understand that its only about 10K that gets taxed 40%, normally take home 3200 so minus 40%= 1920. Would that be my take home roughly?

I'm only worried due to my Mrs on paternity pay and might need to re budget to see me through.

I feel like its a stupid question but its not clicking.

Thanks in advance.

QrizB

You should be taking home more than you were previously.

MSE has a calculator that might help:

https://www.moneysavingexpert.com/tax-calculator/

Plug your numbers into there and see what pops out.

jaypers

I may be stating the obvious to you here but it’s only the bit over £50,270 that gets taxed at 40%. If your salary varies each month the overall PAYE tax paid won’t be fully correct until month 12 as PAYE works on average salary for the year. 

Qyburn

You can get figure from here .. 

https://www.thesalarycalculator.co.uk/salary.php

Bear in mind that the calculator assumes you're on £60k all year. Since this is a change mid-year your total for the tax year will be less than £60k and therefore total tax due will be less.

Since PAYE works on running totals not solely month by month I think what will happen is the amount of tax taken each month will start from not much more than last month, and creep up month by month.

Ch1ll1Phlakes

You say you get taxed at 40% on only £10k then ignore this in your tax home pay.

The first £12570 of your pay is taxed at 0% so the £12570 is fine.
The next £37700 (£50270-12570) is taxed at 20% so £7540 tax and £30160 is take home pay.
This leaves the remaining £9730 to be taxed at 40% so £3892 tax and take home of £5838.

So total tax is £11432 (£7540+£3892) and total take home is £48568. Per month this is approx £4037.

This assumes an even payment of salary and tax across the year. But the £11432 should still be appropriate as you'll have higher tax bill on those higher earning months. This doesn't take into consideration any of your specific tax allowances, pension contributions or tax code changes. But should give you an approximate idea of your tax bill.

Your job promotion should be giving you a higher salary and take home salary at that. If you want an effective tax rate that's simple. 11432/60000 *100 gives approx 19.05% tax rate. So what is your new before tax pay then take 19.05% off it.

Your normal tax home pay doesn't really help with calculations here as it's after tax and doesn't consider your current bonus scheme.

EthicsGradient

Is the "60k with bonus" before or after any pension payments by you? That also affects the threshold when to 40% rate kicks in.

SacredStephan

Ch1ll1Phlakes said:

You say you get taxed at 40% on only £10k then ignore this in your tax home pay.

The first £12570 of your pay is taxed at 0% so the £12570 is fine.
The next £37700 (£50270-12570) is taxed at 20% so £7540 tax and £30160 is take home pay.
This leaves the remaining £9730 to be taxed at 40% so £3892 tax and take home of £5838.

So total tax is £11432 (£7540+£3892) and total take home is £48568. Per month this is approx £4037.

You are ignoring NI and employee pension contributions.

ColdIron

Ch1ll1Phlakes said:

The first £12570 of your pay is taxed at 0% so the £12570 is fine. 

Picky I know but it's not taxed at all, it's tax free and doesn't count towards your taxable income. Maybe you are thinking about the starting rate for savings and the personal savings allowance which are taxable albeit at 0%

Aretnap

ColdIron said:

Ch1ll1Phlakes said:

The first £12570 of your pay is taxed at 0% so the £12570 is fine. 

Picky I know but it's not taxed at all, it's tax free and doesn't count towards your taxable income. Maybe you are thinking about the starting rate for savings and the personal savings allowance which are taxable albeit at 0%

Erm, it is taxable income, but as per the post your first £12570 of taxable income is taxed at 0%.

The distinction is important if you have more than one source of taxable income. If you have a part time job that pays £10000 pa, another party time job that pays £8000 pa, a pension that pays £5000 pa then your taxable income is £23000 and you pay £2086 in income tax. You don't get three lots of "tax free money" - the personal allowance applies across your taxable income as a whole.

talexuser

ColdIron is correct, the £12570 is a tax free allowance, it is not taxed at 0%, the clue is in the description, you can earn that amount before starting to paying tax. It is a picky distinction but becomes important in legal argument when drafting legislation. 

ColdIron

If you look at your tax calculation (for instance your self assessment) it will add up all your income and then simply deduct £12,570. It's not taxed at 0%, it's disregarded. The remainder is taxable

Then and only then it will start to apply the various nil rate bands to that taxable income