OK, I’m supposed to be reasonably switched on, but have never got my head around how the 40% threshold works – mainly due to the added complexity of personal allowances and company car BIK…

So, I should pay 40% tax on taxable income above 30something k…

But, “taxable income” doesn’t include personal allowances, therefore 40% kicks in when you get over 40someting k???

I spent 5 years with an employer that taxed me at 40% even though I was only a smidgen above the threshold.

I spent 5 years with an employer that taxed me at 40% even though I was only a smidgen above the threshold.

HMRC taxes you, not your employer, and that’s just how it works.

Just look at a tax calculation website. Yes the threshold for when you pay 40% is the £30K odd + your allowances, but the £30K ofdd has been reduced by £2.4K or so so you have 20% of that to pay next year.

They are talking of upping everyone’s basic allowance to £10-12K ultimately.

Everything below the personal allowance is tax free.

Everything between the personal allowance and the higher tax band is taxed at 20%.

Everything above the higher tax band and below the additional tax band (kicks in at £150k) is taxed at 40%.

Everything above the additional tax band is taxed at 50%.

If you’ve been paying 40% on the lot because you were just over the threshold then you’ve been quite seriously diddled.

http://www.hmrc.gov.uk/paye/rates-thresholds.htm

If you’ve been paying 40% on the lot because you were just over the threshold then you’ve been quite seriously diddled.

Agreed. :-O

This is retrospective – not related to the proposed / impending changes. Just that being in the news again has triggered the same questions… (along with the ongoing news of PAYE computers errors)

the threshold for when you pay 40% is the £30K odd + your allowances,

Salray at the time < threshold + allowances, but > threshold on its own
So I spent 5 years paying higher tax rate than I should have? At the time I asked employer and IR / HMRC to review – never got any tax back 🙁

If you’ve been paying 40% on the lot because you were just over the threshold then you’ve been quite seriously diddled.

Not on the lot, but it felt like I was being fleeced

Not on the lot, but it felt like I was being fleeced

Why?

If you earn over the threshold, you pay 40% on the element that is over the threshold. It is what it is.

Of course stamp duty on houses IS a rip-off – go over £250k (IIRC) and pay 3% on the whole lot (£7.5k on £250k). Pay £249,999.99 and only pay £2,499.99.

The 40% threshold seems to be dropping fairly rapidly in real terms. I think I heard on the radio that it used to be about 1 in 20 paying, and it will be reaching 1 in 5 in a couple of years.
What’s the world coming to if you can’t even vote Tory for lower taxes.

Why?

If you earn over the threshold, you pay 40% on the element that is over the threshold. It is what it is

But if I was, say 1k or so over the threshold, I shouldn’t have been paying anything at 40%. My salary at that employer was never > threshold + allowances. Even if I should have been taxed at 40%, the proportion of my overall income taxed at 40% should have been negligible…

This is prompting me to dig out old payslips and look at in more detail.

When does the child benefit cut for those above the 40% threshold come in?

2013? – need to drop the threshold to exclude more folks from CB

Cynics would also say that as salaries have slowed, less are getting captured each year by incremental pay rises – so time to incrementally drop the threshold…

But if I was, say 1k or so over the threshold, I shouldn’t have been paying anything at 40%. My salary at that employer was never > threshold + allowances. Even if I should have been taxed at 40%, the proportion of my overall income taxed at 40% should have been negligible…

This is prompting me to dig out old payslips and look at in more detail.

Did you even read my post?

This salary plus allowances idea you’ve got in your head is a load of crap.

But if I was, say 1k or so over the threshold, I shouldn’t have been paying anything at 40%

Yes you should, you should be paying 40% on that 1k which equates to £400 or an additional £200 more than the basic rate (at current tax rates).

Bear in mind that the absolute salary that takes you into the 40% bracket is not the same for everyone. Most benefits that employers give (e.g. your car allowance, private health care etc) are taxable. This is normally achieved by reducing your tax free allowance thereby reducing the salary at which you enter different tax bands. The salary difference between the 20% and 40% brackets remains the same.

But if I was, say 1k or so over the threshold, I shouldn’t have been paying anything at 40%.

Yes you should – you should have been paying 40% on the £1k.

Wot Stuey said.

The allowances bit is the bit you don’t pay tax on – the ‘first’ bit of salary, then you get taxed at 20% UNTIL you get to the higher rate threshold and then taxed at 40% for everything (until you get to the 50% mark) you earn over that threshold. The 40% earnings threshold is the same for everyone*

Except tax doging footballers, company directors, etc

2013? – need to drop the threshold to exclude more folks from CB

Cynics would also say that as salaries have slowed, less are getting captured each year by incremental pay rises – so time to incrementally drop the threshold…

####ing fantastic. I look forward to my £2k pay cut.

I’ll never forgive Labour for ####ing things up so badly that this shower of ####s managed to get elected.

For no company car here is how you’d pay tax

first 6475 0%
from there to 43875 20%
>43875 40%

If you had a companyh car and it was a taxable benefit of £4100 it would look like this by lowering your personal allowance.

2375 0%
39775 20%
>39775 40%

I suspect a lot more company car owners are paying higher rate tax than actually realise it

its your own fault, shouldve become a banker the your accountant can make sure that you evade tax and get to keep your fat bonus

Did you even read my post?

This salary plus allowances idea you’ve got in your head is a load of crap

Yes, I did, but it’s in the mix with a whole load of other contradictory stuff.

Why are the media fixated on 40 something then?

Yes you should – you should have been paying 40% on the £1k.

So, should have made a difference of somewhere in the order of %30-50/month? Felt like 200-300/month