Higher rate (40% of income tax affect you? (UK)?

Question

For Up to £33,300k p.a, it's 22%, then it goes up to 40%.

Are you therefore worse off earning £33,400 than if you were earning £33,299?

How does it affect other things like Pension etc?

Answer 1

no because you pay 40% of everything over 33,300. so on 33,400 you will pay £100 at the higher tax bracketr and so earn an extra £61 than if you earned £33,299

Answer 2

No, because you only start paying tax at the higher rate for earnings over the £33300 threshold. Sof if you earn £33,400, you pay the tax at 22% on £33,300 (well - 0% on the first £4,000 or so, then 22%) and 40% on the £100 over the threshold.

It does mean that pay rises once you're over that limit fell like a lot less, as you only get 60% of it in your pocket rather than 80%.

Answer 3

Higher rate tax chips in at £33,301 anything above 33,300 is taxed at 40%. .i.e if you earned £33,400 then to find only the difference between £33,300 and £33,400, .i.e £100 would be taxed at 40%

If you were taking a pension then you are allowed a maximum of 17.5% of your annual income earned. This amounted is deducted from your total income then the balance is taxed.

So in the case above if you were earning £33,400 p.a. you first have to deduct 17.5% and then tax the balance.

Answer 4

Everyone here is right about the 40% being charged on earnings above £33k.

A pension deducted from your gross pay before taxes are paid, so if you earn £40k and are contributing £7k into a pension a year then you will have a taxable salary of £33k (and therefore only fall into the 22% bracket)

Answer 5

As the others have said below, you are only taxed at 40% after your net relevant earnings exceed £33000.

With regards to the effects of higher rate income, there are several things:

Personal Pension contributions - you are given basic rate relief of 22% at source. As a higher rate earner and therefore entitled to 40% relief, you can claim the extra 18% either through your tax code, in which case you need to supply your annual contribution amounts to HMRC or claim it as a refund at the end of the tax year.

Expenses/Benefits - these also become liable at 40%

Savings Income - 20% is deducted at source on bank/building society interest, but as a higher rate payer, they become liable at 40%, so you have to pay tax on the extra 20%

Dividend Income - 10% tax at source, higher rate amount is 32.5%, so you pay extra tax on the 22.5% difference

Answer 6

No, because you only pay 40% tax on the amount OVER £33,300 (not sure of that figure, but I assume you are correct). The rest is taxed at a lower rate - mostly at 22%, but the first £6,000 or so is not taxed.

Answer 7

No, because you only pay 40% tax on your taxable income over £33,300, not on the whole lot.
NIC is payable at a flat 11% rate and does not increase with monthly pay.

Answer 8

The 40% only applies to the amount earned over 33k.

Answer 9

no longer particularly real. that's real that the utmost fee of earnings tax hit ninety 8% (actual the utmost ever replaced into 147.5% in 1967/sixty 8!) yet those acceptable costs have been in basic terms utilized to the very maximum slice of entire earnings, and in basic terms affected very prosperous human beings.

Answer 10

Not that worse off because you only pay excess (ie anything over) and it doesn't affect your tax allowance etc.