higher rate tax?

Bogof_Babe

I am so pleased to find this thread, as I was just about to ask the same thing. Not because I have that sort of income - far from it, but because I am fed up of people whinging about being "taxed @ 40%", when in actual fact they may only be being taxed @ 40% on a very small proportion of their income.

This is often used to play the "poor old me" card when things like Council Tax are being discussed.

Someone earning say £40K will probably only be paying a couple of hundred £ in tax more than someone on £35K then?

reddevilled

Bogof_Babe wrote:

I am so pleased to find this thread, as I was just about to ask the same thing. Not because I have that sort of income - far from it, but because I am fed up of people whinging about being "taxed @ 40%", when in actual fact they may only be being taxed @ 40% on a very small proportion of their income.

This is often used to play the "poor old me" card when things like Council Tax are being discussed.

Someone earning say £40K will probably only be paying a couple of hundred £ in tax more than someone on £35K then?

Someone on 40 k would pay around £1.5k more than someone on 35k in tax. There is also NI though and I believe that the NI thresholds mean that there is a point were you pay 22% tax, but only 1% NI before you're tax rate goes up to 40%

You're quite right though, if you take NI into the equation the difference between higher rate and basic rate is 41% compared to 33%, so not that different really.

isasmurf

reddevilled wrote:

There is also NI though and I believe that the NI thresholds mean that there is a point were you pay 22% tax, but only 1% NI before you're tax rate goes up to 40%

Yes, you stop paying 11% NI on weekly earnings over £630, which works out to be a salary of about £32,760 per year.

Robert_Sterling_3

Look on the bright side.
There has been a time in my life when the higesst rate of
income tax was 83% but there was also a surcharge of 15%.

So from an additional £1 you were left with 2p.

I kid you not.

For confirmation read "Ken Dodd Laughter and Tears" by Gus Smith.

in_my_wellies

I pay into a compusory pension. About £200 a month, therefore £1200 a year. Am I taxed on this? To make it simple can I add this on to personal allowance. £37,295 + £1,200 = £38,495. I would then only be taxed at 40% on any salary amount above that and savings interest.

Thanks for all the replies so far.

lisyloo

I pay into a compusory pension. About £200 a month, therefore £1200 a year. Am I taxed on this?

It might depend on the scheme you are in but usually yes you are taxed and then 22% tax relief is put into your pension.

However you have to claim 40% tax relief via your tax return.

I think you can claim back relief for the past few years as well, if you haven't done this.

isasmurf

in_my_wellies wrote:

I pay into a compusory pension. About £200 a month, therefore £1200 a year. Am I taxed on this?

That depends on whether it is an occupational pension or a (group) personal pension. If it is an occupational pension then it will be taken from your wages before tax is deducted, therefore you pay no tax on it and there is nothing to reclaim. You still pay NI on it though.

If it is a (group) personal pension then tax will have been deducted from it, but the pension manager will automatically reclaim basic rate tax, and you must reclaim higher rate tax yourself.

The easiest way to find out which you are is to look on your payslip, and somewhere on there should be "Taxable pay this period". If this is the same as your gross amount it is most likely you are paying into a PP and have had tax deducted on your contributions. If this taxable pay is the same as your gross period minus your pension contributions then you are paying into an occupational scheme and no tax has been deducted.