Calculating how much higher rate tax I pay: formula please?

pandora205

Hi

I'm sure this is here on the forum somewhere but I can't find it.
I'm a higher rate tax payer but I'm not sure how much I pay at this rate now as my payslip (I'm on PAYE as I work in local government) doesn't show the amounts separately. I already contribute to AVCs via my employer and want to make sure I am maximising these to reduce my tax, as I know the ceiling has been lifted on these now.

What I need to know is, how do I get from my annual salary and tax coding to find out 40% tax? I do have my P60 for the last year but this includes my salary rates prior to this year's pay increase, so isn't that useful. Once I have the information I can decide whether and how much to raise my AVC contribution. (I might need to ask about that again!) I just can't remember what comes off first (NI and Superannuation and AVCs? What about my travel expenses?)

Thanks for any help

[Deleted User]

Hi,

£0 - £36000 @ 20%, over £36000 @ 40%.

You could use this wee gadget, just do two calculations, one for £36000, and another for your salary, to find the difference.

jem16

pandora205 wrote: »

What I need to know is, how do I get from my annual salary and tax coding to find out 40% tax?

If your tax code is 543L, then take off £5430 from your gross salary. The deduct your superannuation payments (not NI or expenses). Then look at what is left.

Up to £36,000 is at 20%. Anything above that is at 40% so this is what you need to put into the pension.

pandora205

Thanks - those are both very useful. I have everything I need now.

CLAPTON

your salary slip will often have a line for 'taxable' pay... this is your gross salary less pension less non taxable expenses and is the one to look at.

pandora205

I think I've now done the calculation and discovered I'm still paying about £1840 at higher rate. Now all I need to do is to calculate how much I need to increase my AVCs (currently 9% salary) to lose this (ie to gain the tax relief so I'm not paying any higher rate).
Can anyone help me with this please? How do I calculate this percentage from my current figures now that I know how much basic rate and higher rate I pay.
Thanks again

CLAPTON

if the AVC deductions are made out of gross income then simply 1840 will be the right figure: if they are made out of taxed income then 1840 x 0.8 = 1,472 as the AVC co. will gross up the contributions

pandora205

The AVCs are taken from gross income before tax but tax relief is received on the contributions.

Does this mean I just need to increase my AVCs to another £1840 per annum (or whatever percent of my salary that is) then I will in effect not be paying tax, or is it more?

Thanks

jem16

pandora205 wrote: »

The AVCs are taken from gross income before tax but tax relief is received on the contributions.

Does this mean I just need to increase my AVCs to another £1840 per annum (or whatever percent of my salary that is) then I will in effect not be paying tax, or is it more?

Thanks

If you are £1840 into higher rate tax then paying £1840 into your pension will take you back into basic rate.

However do remember that taxable income includes savings interest and dividend payments from any funds/shares. You would have to take that into account too.

patman99

I need a formula that I can use in a spreadsheet to allow me to carry out estimated Tax & NI contributions on a given set of figures.
I want to be able to type in the hours I have worked, and get a pre-pay packet estimate of how much I am likely to get paid.
If it works, then it will allow anyone who uses it to see roughly how much they can potentially earn given a set of hours & rates.

ManPants

I'm in a similar pickle....................

I work in the NHS and how much I earn above and beyond my basic is dependent on how much extra I work. As I'm saving up to buy a new house with a massive price tag in 2 - 3 years; I've been working like crazy and have already earned £20,000 Gross in this tax year alone (divide that by £12.81 and you'll see how much I have worked). Recently when I was telling a friend they warned me that I'll be on higher interest tax in another 4 months if I carry on as I am.

Do I just carry on working and saving then all of a sudden tip over the £40,000 mark and suddenly start paying 40% tax and not save much for my efforts for the last few months of the year or what can I do? I don't understand how people are supposed to save house deposits etc if they are then penalised for doing so by paying 40% tax?

Stuart