Higher tax bracket question

[jolies]

Apologies for my ignorance, just hoping some one can advise. DP has been offered a pay increase and new salary would be £52k a year. Neither of us have earned this much before so both don't have much knowledge around it. Looking online it says anything over than £50,270 is taxed at 40% rather than the usual 20%. Does that mean he would be better off on a salary of 50k? Or is only some of it taxed on 40%? I have been on the salary calculator which is my go to website and my monthly pay always matches what is on there but it doesn't seem like the 52k salary is taxed at 40% each month on a whole. Or does it mean that he will be taxed at 20% for 50,270 but only the extra 1730 would be taxed at 40%? I sound stupid and I hope I make sense but would be grateful if someone could help advise!

Only the extra £1730 gets taxed at 40%. The first £50,270 is at the lower rate.

Yes you are correct

but surely your DH knew this?

It affects child benefit as well.
But pension contributions etc can bring it down.

Only the amount over £50, 270 is taxed at 40%. So no, he wouldn't be better off staying below the threshold. Unless he has a company car, where I think the tax implications are trickier because of the rate paid on the car element.

As per other responses, but he have a workplace pension and is it salary sacrifice? If so it’s unlikely to be an issue anyway. My salary is around £53k but because of my pension contributions (around 5.5%) I don’t pay any higher rate tax in practice.

Yes - it's only the bit over £50, 271 that is taxed at 40% - so here it would breakdown, simply, as

• 0% on £12,570
• 20% on the rest up to £50,270 (£37,700)
• 40% above £50,270 (so on £1,730)

this gives an idea of the extra -

www.thesalarycalculator.co.uk/salary.php

he would end up around £1,100 a year better off, although that doesn't include any increase in pension he might pay.

HOWEVER - once he earns above £50k, if you get child benefit, some of that needs to be repaid. if he doesn't pay into a pension and his taxable pay is just that 52k, he would have to repay around 20% of any child benefit you receive. For 2 children that would be £377. So net benefit would reduce to around £700.

He could decide to put the extra into a pension, which would mean retaining the child benefit.

Thanks. He wasn't 100% sure when we spoke about it and said he needed further clarification. We're just trying to work out it it's worth him taking it as it requires him to be away from home a lot, he already works away from home and always has done since our DS was born (now 1) but has been looking for a job at home as he feels like he is missing out with DS although after in his line of work jobs based at home are rare. I would love to have him home, and I'm not sure if I could manage any more children (which we would both love) alongside working and being the sole carer 4.5/5 days a week so it's a difficult one, but I fully support him and he's great at his job.

That's very helpful thank you. Yes we do currently get child benefit, so would we just contact the child benefit team if he accepts and they deal with that? We currently get £84 a month so that would decrease to approx £68 a month is that right? Do you know if it also affects tax free childcare? We use the 20% to pay towards DS child minder fees.

You need to complete a self assessment tax form to pay back the child benefit. (So you get it, he pays it back...)

It wouldn't affect the tax free childcare, no, you need to over £100k for that.

He would need to start doing a yearly self assessment tax return, as PuttingDownRoots says - it's his responsibility to do, as child benefit will continue to be paid at the normal rate, and his tax code will be adjusted for the following year to pay the overpayment back..

He can consider salary sacrifice on the extra £1730 into his pension to avoid paying the higher rate tax on that.

Do you get child benefit as others have said over 50 you need to start paying some back up to 60 when it stops. Increasing pension can mitigate this to take back to under 50