Tax knowledge.

[ukracer]

Is there anyone on the forum in a position to advise me on a tax situation.
Essentially I have been asked to sort something out for a relative who seems to be a bit loopy.

What I am unsure on is what the current level of tax band's are. How each band impacts on the overall tax liability as this person seems to think that doing the hours required after a wage rise is costing them thousands in tax.

If anyone is in a position to help I can give you more details via PM.

Anyone in the West Midlands who can recommend a tax advisor/financial advisor local to us that would be appreciated.

 

[premmington]

Is there anyone on the forum in a position to advise me on a tax situation.
Essentially I have been asked to sort something out for a relative who seems to be a bit loopy.

What I am unsure on is what the current level of tax band's are. How each band impacts on the overall tax liability as this person seems to think that doing the hours required after a wage rise is costing them thousands in tax.

If anyone is in a position to help I can give you more details via PM.

Anyone in the West Midlands who can recommend a tax advisor/financial advisor local to us that would be appreciated.

Even thou I do my own book keeping and file my own returns - I do use an accountant for tax advice.

Second bit of advice - don't involve yourself with loopy relatives

But you can google the tax bands. Plus you start loosing your base allowances at over £100k

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The standard employee personal allowance for the 2023 to 2024 tax year is: £242 per week. £1,048 per month.
...
Wales.

PAYE tax rate	Rate of tax	Annual earnings the rate applies to (above the PAYE threshold)
Basic tax rate	20%	Up to £37,700
Higher tax rate	40%	From £37,701 to £125,140
Additional tax rate	45%	Above £125,140

 

[hotponyshoes]

Employed or self-employed?

You do pay more tax if you earn more.
But you only pay a higher % in the higher bands, so you take home more but basically work for less per hour the more hours you do.

Financially, you're never worst off. unless you are claiming some kind of benefits that get withdrawn and are on the margins of hours.

Mentally, I'm not sure if it's worth working twice the time for 3/4 or less of the pay so I can see why people don't want to start loosing half their income to tax..

 

[premmington]

Employed or self-employed?

You do pay more tax if you earn more.
But you only pay a higher % in the higher bands, so you take home more but basically work for less per hour the more hours you do.

Financially, you're never worst off. unless you are claiming some kind of benefits that get withdrawn and are on the margins of hours.

Mentally, I'm not sure if it's worth working twice the time for 3/4 or less of the pay so I can see why people don't want to start loosing half their income to tax..

+1 for the above

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Once you get to £125.140k a year - you need to start pumping money into a pension - huge lumps to avoid the full loss of allowances (speak to an accountant for details).

But essentially the more you earn the more tax you pay - but the more you go home with

 

[hotponyshoes]

Even thou I do my own book keeping and file my own returns - I do use an accountant for tax advice.

Second bit of advice - don't involve yourself with loopy relatives

But you can google the tax bands. Plus you start loosing your base allowances at over £100k

------------

The standard employee personal allowance for the 2023 to 2024 tax year is: £242 per week. £1,048 per month.
...
Wales.

PAYE tax rate	Rate of tax	Annual earnings the rate applies to (above the PAYE threshold)
Basic tax rate	20%	Up to £37,700
Higher tax rate	40%	From £37,701 to £125,140
Additional tax rate	45%	Above £125,140

Don't forget national insurance,
Technically that's not tax but in terms of the loopy relative's situation, they would probably consider it the same as.

 

[Robotstar5]

Employed or self-employed?

You do pay more tax if you earn more.
But you only pay a higher % in the higher bands, so you take home more but basically work for less per hour the more hours you do.

Financially, you're never worst off. unless you are claiming some kind of benefits that get withdrawn and are on the margins of hours.

Mentally, I'm not sure if it's worth working twice the time for 3/4 or less of the pay so I can see why people don't want to start loosing half their income to tax..

In my last job I carefully didn't work much overtime so I stayed a few hundred below the 40% threshold

 

[drjim]

Don't forget if you have the talent to hit 100k you lose your tax free allowance at £1 per £2 earned so pay effective 66% tax between 100 and 125 when you then only pay 45%

 

[premmington]

Don't forget national insurance,
Technically that's not tax but in terms of the loopy relative's situation, they would probably consider it the same as.

I agree -

Don't forget if you have the talent to hit 100k you lose your tax free allowance at £1 per £2 earned so pay effective 66% tax between 100 and 125 when you then only pay 45%

Correct - £125 k and over is still only 45%

 

[drjim]

I find it offensive that working harder is worth less.

 

[hotponyshoes]

Yes.
But if you earn 101k you still take home more than if you earn 99k.

 

[premmington]

I find it offensive that working harder is worth less.

The allowance thing miffs me abit - frozen till 2028 (either we got inflation or we have not - you can't have your cake and eat other peoples as well)

The £100 - 125k PAYE range is not fair. It just is not...

But it only affects 2% of working people in the UK (just googled it).

 

[premmington]

Yes.
But if you earn 101k you still take home more than if you earn 99k.

YES you do - but not allot kid. But yes you get more in your wage packet.

 

[drjim]

Yes.
But if you earn 101k you still take home more than if you earn 99k.

Only just.

If you get a 50k payrise from 100k I think you take home 1800 a month - that's wrong.

 

[drjim]

Actually given the other entitlements you lose if you go over 100k it would not be worth taking that payrise for most people.

 

[hotponyshoes]

I'm not saying I think it's worth it, or that i think its right/fair. just that you still get more.
Also, it's not all bad. At those levels you can normally afford to loose a load of tax by pension contributions etc. while still having plenty to enjoy life with.
Also, some people get pushed into the brackets temporarily as they need the income to get a mortgage so although they might not get as much per hour it can payback in the long run.

 

[drjim]

It's a tricky tax bracket.

I would suggest that if you actually work to earn money (rather than being a banker) tax rate should hit 20% at say 100k and work as hard as you like after that. Tax income for gov would go up as more people paying 20% is better than almost nobody working into 66/45% headwinds. I think Tom Clancy "did" that in one of his Jack Ryan books.

I have many Consultant colleagues just below 100k and won't do any more work because of tax issues. I will probably be retiring at 55 because of tax issues - 53 now.

 

[Pigeon_Droppings2]

I have many Consultant colleagues just below 100k and won't do any more work because of tax issues

Yup...why on earth would anyone bother.

This actually came in 10+ years ago...but with inflation I think plenty of people will soon realise it ain't worth bothering.

 

[premmington]

Yup...why on earth would anyone bother.

This actually came in 10+ years ago...but with inflation I think plenty of people will soon realise it ain't worth bothering.

Can't see the allowances were frozen in the last budget till 2028.

I got a "bee in my bonnet" about this...

 

[drjim]

Early retirement is my plan to avoid being taxed to death!

 

[hotponyshoes]

It's a tricky tax bracket.

I would suggest that if you actually work to earn money (rather than being a banker) tax rate should hit 20% at say 100k and work as hard as you like after that. Tax income for gov would go up as more people paying 20% is better than almost nobody working into 66/45% headwinds. I think Tom Clancy "did" that in one of his Jack Ryan books.

I have many Consultant colleagues just below 100k and won't do any more work because of tax issues. I will probably be retiring at 55 because of tax issues - 53 now.

Probably too many people with 10-15k a year jobs that won't stand for that.
They will be expecting somebody on anything over double their wage to pay a higher % of tax than they do.

I know plenty of proper grafters on less than 25k. Even sub 20k.
Mostly doing essential jobs on a low wage.

I think it's fair enough that somebody sat in a city office with air-con clicking buttons on a computer for 100k pays more towards running the country than a lad milking cows at 4am.

Not so fair for the other grafters who work all hours cutting/grinding/welding round the clock trying to do 80k.

But I don't have a clue how you could run a tax system around effort based work?

Work smarter, not harder as they say...