Tax knowledge.

[ukracer]

Ok I appreciate its an interesting and emotive subject. But to clarify it seems like its taking them into the 40% Bracket.
BUT the wage they are concerned about is only being taxed at 20% PAYE.
So it is conceivable that they are indeed loosing 20% of the full wage.....this is assuming their other incomes are below the tax free threshold. (And is because the Initial 20% tax is paid by the employer.

So anything extra they are deemed to owe is taken from other income.

 

[drjim]

Don't have an issue with paying more, but there should come a point where you have paid your share.

It seems that 100k is the most anyone should earn without being punished, what happened to aspiration!

 

[Pigeon_Droppings2]

So it is conceivable that they are indeed loosing 20% of the full wage.....

There's processes for reclaiming any overpayment....but HMRC will usually pick up on it and process a refund automatically....takes them a while though!

Worst case...do a self assessment and reclaim it that way surely?

It can happen when there's multiple paye payments happening (multiple jobs).

Our 100 year old tax system is designed by a civil servant who does his 1 job for a whole lifetime!

 

[ukracer]

There's processes for reclaiming any overpayment....but HMRC will usually pick up on it and process a refund automatically....takes them a while though!

Worst case...do a self assessment and reclaim it that way surely?

It can happen when there's multiple paye payments happening (multiple jobs).

Our 100 year old tax system is designed by a civil servant who does his 1 job for a whole lifetime!

Well yes but I am not convinced they are being overtaxed. Its a strange one as the tax is paid by the employer. All they see is 530 per month and tax is £109.
So if my maths and understanding is correct the worst case is they should be taxed a further 109 given that this job is tax paid by employer.

There are two other flies in the ointment in that they are on an emergency tax code and its hard to get in touch with a sensible person at the tax office.

 

[ukracer]

There's processes for reclaiming any overpayment....but HMRC will usually pick up on it and process a refund automatically....takes them a while though!

Worst case...do a self assessment and reclaim it that way surely?

Well yes but having never done one or seen one I can't advise....
And in the meantime they want to do less hours which will mean they will end up loosing the lot.

 

[premmington]

Don't have an issue with paying more, but there should come a point where you have paid your share.

It seems that 100k is the most anyone should earn without being punished, what happened to aspiration!

No it never stops - when you worked hard and got some assets about you - the Capital Gains and Inheritance taxes start.


Edit: There is a saying. "Nothing more certain than death and taxes".

 

[Pigeon_Droppings2]

So if my maths and understanding is correct

It's hard to say...most payrolls will just assume the personal allowance gets spread evenly over the tax year I think. If earnings vary month to month it can throw things out...but these will usually get corrected automatically as the end of the tax year approaches.

As we are close to the end of tax year...why not take the total gross earned to date and stick it in an online tax calculator...then compare to the total tax paid to date on payslips. Would give you a rough idea I think.

 

[Pigeon_Droppings2]

No it never stops - when you worked hard and got some assets about you -

Problem is you're fighting the system...the system will punish anyone who tries to over achieve...so simply plod along like everyone else!

If working 2 days earns you £200k a year...then work 1 day!

 

[ukracer]

It's hard to say...most payrolls will just assume the personal allowance gets spread evenly over the tax year I think. If earnings vary month to month it can throw things out...but these will usually get corrected automatically as the end of the tax year approaches.

As we are close to the end of tax year...why not take the total gross earned to date and stick it in an online tax calculator...then compare to the total tax paid to date on payslips. Would give you a rough idea I think.

Yes but payrolls won't know about any other tax liabilities.

 

[m_c]

Well yes but I am not convinced they are being overtaxed. Its a strange one as the tax is paid by the employer. All they see is 530 per month and tax is £109.
So if my maths and understanding is correct the worst case is they should be taxed a further 109 given that this job is tax paid by employer.

There are two other flies in the ointment in that they are on an emergency tax code and its hard to get in touch with a sensible person at the tax office.

That is why they'll be getting all income taxed.
Is this their only job?
AFAIK if they get the tax code sorted, then there should be an automatic refund at some point of any overpayment.

 

[ukracer]

That is why they'll be getting all income taxed.
Is this their only job?
AFAIK if they get the tax code sorted, then there should be an automatic refund at some point of any overpayment.

Yes only job but does have pension, plus private pension plus investments.

 

[Pigeon_Droppings2]

Yes but payrolls won't know about any other tax liabilities.

Payrolls are basically an approximation used to get roughly the right employment income tax.

Over/under payments usually get rectified.

Self assessment deals will "all" tax liabilities...self assessment will cover income taxes, share dividends, interest income etc etc. Usually when you hit the 40% threshold they start asking for self assessments.

 

[m_c]

Yes only job but does have pension, plus private pension plus investments.

If they're drawing those pensions, then I don't think they'll get a tax code, so will just have to plan for getting a refund after the tax year ends.

However it's probably worth a chat with a tax advisor/accountant to check if there isn't some way to get a tax code, but it might then result in having to do self-assessment, which I'd avoid as much as possible.

 

[skotl]

Seems like the thread has been dragged off topic a few times by quasi-political / quasi-economic-theory diversions.

I think I understand the original query and I can hazard a guess at the problem. The first, and common, misconception is that moving from one tax bracket to another is a huge step-jump when it's not: moving into the next tax bracket typically means that the next batch of earnings is taxed at a higher rate - there is literally no way that the tax system allows you to earn more and take home less.

However... that misconception is often fueled by the sledgehammer approach that tax-code adjustments can have. The tax code under PAYE is simply a way to attempt to even your eventual tax liability over the tax year. As it's a blunt instrument it can often end up knackering you if it over-adjusts for a potential liability.

Worst case example (all with made-up numbers):

> You earn £1,000 a month for eight months and your PAYE code assumes an income of £12k for the year
> In January (three months before the end of the tax year) you get a sizable bonus and they pay you £3k
> HMRC assumes that your salary is now £36k a year and overcompensates, resetting your tax code
> You get hammered in February because they assume you need to pay tax on £3k a month for the remainder of the year rather than the £1k you were being paid before

It doesn't always work out that way (sometimes it takes HMRC 2 years to catch up!) but I've been surprised to get a really light paycheck one month because the tax code change ate a chunk of forward income that may or may not materialise.

@ukracer I'll drop you a PM and see whether I can help out. My tax affairs are complex enough that I've seen pretty much all of the pros and cons in the system

 

[Morrisman]

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

This^^^^
If they really are loopy you're going to end up in a world of pain trying to transliterate between their world, and the real world.

 

[Morrisman]

Seems like the thread has been dragged off topic a few times by quasi-political / quasi-economic-theory diversions.

I think I understand the original query and I can hazard a guess at the problem. The first, and common, misconception is that moving from one tax bracket to another is a huge step-jump when it's not: moving into the next tax bracket typically means that the next batch of earnings is taxed at a higher rate - there is literally no way that the tax system allows you to earn more and take home less.

However... that misconception is often fueled by the sledgehammer approach that tax-code adjustments can have. The tax code under PAYE is simply a way to attempt to even your eventual tax liability over the tax year. As it's a blunt instrument it can often end up knackering you if it over-adjusts for a potential liability.

Worst case example (all with made-up numbers):

> You earn £1,000 a month for eight months and your PAYE code assumes an income of £12k for the year
> In January (three months before the end of the tax year) you get a sizable bonus and they pay you £3k
> HMRC assumes that your salary is now £36k a year and overcompensates, resetting your tax code
> You get hammered in February because they assume you need to pay tax on £3k a month for the remainder of the year rather than the £1k you were being paid before

It doesn't always work out that way (sometimes it takes HMRC 2 years to catch up!) but I've been surprised to get a really light paycheck one month because the tax code change ate a chunk of forward income that may or may not materialise.

@ukracer I'll drop you a PM and see whether I can help out. My tax affairs are complex enough that I've seen pretty much all of the pros and cons in the system

My daughter's worked a bar job since September, taxed the full 20% every month, but no way is she ever going to earn over the £12,500 threshold, but she still has to wait until April before she can get the deductions back.
Conversely, my foreign US$ pension comes in all year round, but HMRC have to wait until April before they can get their pound of my flesh.

I would have thought i'd get some slack, bringing foreign capital into the country, but no, I get hit like everybody else....

 

[The Artilleryman]

As someone who has a problem with HMRC and tax rates, lets put some facts here, as there is a load of BS being spouted.

Employer will deduct tax according to the tax code supplied by HMRC.

If as appears here that the person has a pension and other (declared) income, HMRC will issue a tax code to each employer/pension provider, based figures provided by pension provider or other declared income.

Easy way to check is :-

Tax code- remove letter and add zero IE 1257L is a tax free allowance of £12570

Find pension annual rate - should be provided at the start of each financial year

Salary - will be X per year (doesn't work so easily for hourly paid)

Add pension and salary, minus tax free allowance, then times 0.8 to find net income & times 0.2 to find income tax. NI not taken into account as you do not pay NI after State Pension age.


As an example for next tax year

Tax allowance £12570
State Pension (new) £10170

Tax Code 240L

This would be the tax code for a person receiving the New State Pension as of 6th April 2023.

Hope this helps.


I'm in the position where it took DWP 6 months to tell HMRC that I started to receive my state pension part of the way through the tax year and although HMRC changed my Tax Code they have taken less than I owe and will therefore take the rest next tax year 23/24 whereas I want to pay what I owe in full before the end of the tax year.

 

[AVI_8]

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

Yes and no, the key thing is that you put everything you earn over £100k into your pension pot, you can put £40k into it each year, HMRC won’t get their grubby manky stinking hands on it then and you’ll still keep your tax free allowance.
If you then earn over £140k (nice problem to have) it’s better to start going part time in order to prevent being bent over a bench and royally shafted even more than you already are by the by the grubby money grabbing bar stewards that are HMRC.

 

[addjunkie]

Yes and no, the key thing is that you put everything you earn over £100k into your pension pot, you can put £40k into it each year, HMRC won’t get their grubby manky stinking hands on it then and you’ll still keep your tax free allowance.
If you then earn over £140k (nice problem to have) it’s better to start going part time in order to prevent being bent over a bench and royally shafted even more than you already are by the by the grubby money grabbing bar stewards that are HMRC.

Its now 60k, since the budget thing to get oldie doctors back to work. I too think the 100 to 125 bit is grossly imbalanced, but no system is perfect. If you lucky enough to earn this king of money, you need to accept that as part of a minority of high earners, you pay for those not so fortunate. It used to be 50%, before dropping to the current rate,but research the tax history of the past its eyewatering

 

[skotl]

Two points on the recent posts:

First, don't think that at any threshold you start losing money. You only pay tax at the appropriate rate for the band that it applies to.
So (simplistically, ignoring your tax code / tax free allowance) you pay 0% on the first £12,570, then 20% on the amount between that and to £50,270, then 40% on the amount between £50k and £150,000 and then 45% on any earnings over that.
Earning more means you will pay progressively more tax on the higher amounts but it doesn't mean that you're ever in the position where you have less money the more you earn.

Second point (trying not to stray into politics) the tax we pay does pay for doctors, nurses, police etc. so it's generally a good thing to pay taxes!