To ask about the 40% tax bracket

[LauraLorelei]

We've never been well off in any way, and have a severely disabled DD so have lived on the poverty line most of her life so I can be her carer.

DH recently got a much better job and earns 30k, which has made a huge difference. For the first time we aren't scratching around for every penny.

A management opportunity has come up at his company which would be really great for him. He is more than qualified and has a good chance of getting it if he goes for it.

However, the pay is between 33-45k depending on experience etc. Looking it up yesterday I was dismayed to find that the 40% tax bracket would be from 34.5k, which would actually mean a significant pay cut if he was offered over this, and us being very poor again, which makes it seem pointless. It seems really low to be paying 40% and be able to afford the basics. I realise we are in a different situation to most as I suppose I would be earning similar if I wasn't a full time carer and so we are totally dependent on his wage.

Have I read this wrong? Is it worth him even going for this job in our current situation?

Please don't flame me, I am very much in agreement with people contributing and paying their taxes and I would work if I could, but cuts to care packages etc have meant I really can't.

It won't be a paycut.

He'll pay the same rate as now (i forget what it is) up to the threshold and 40% only on what he earns above the threshold.

You only pay 40% of the bit that's over the tax bracket, so if he was earning 36k, he'd pay 40% tax on 1.5k, not the whole amount.

Hope this makes you feel better!

You only pay 40% on the money over that tax bracket.
You still get your full tax free allowance (£11300ish) and then the 20% on the next £34000ish)
It always means a pay rise don’t worry!!

Bit of a quick reply, but just wanted to make sure you knew that it's only the earnings above the tax threshold, which is 45k, that are taxed at 40 percent. Not all your earnings. So your husband would still be earning more than now.

It's from 34.5k over the tax allowance, which is usually 11.5k IIRC.

So your first 11.5k is tax free, your next 34.5k is 20% and above that is 40% So hell not be paying 40% unless he's earning 46k.

Wouldn't he be paying 20% on anything between about £11k-£45k, then 40% on income above £45k?

Obviously do check everything out, but I doubt you'd be worse off.

www.citizensadvice.org.uk/debt-and-money/tax/income-tax-how-much-should-you-pay/income-tax-rates/

@WineAndTiramisu You only pay 40% of the bit that's over the tax bracket, so if he was earning 36k, he'd pay 40% tax on 1.5k, not the whole amount.

40% tax only kicks in after £43,001, not 36k.

(am clearly not typing fast enough )

Yes you've read it wrong. You need to add the personal tax allowance (of £11850 IIRC) to the figure you have read. Upper tax rates start at over £45,000 pa. if he goes a bit over (maybe when he's been there a while) he can put the extra into his pension if he wants to.

Up to £45k you won't pay 40% at all and then only on the bit above £45k as pp have said. No need to worry about a pay cut. Good luck to you and your DH.

Money saving expert has a good online tax calculator, where you put in all your details and it tells you what your take home pay will be

The 40% tax bracket kicks in at £45k. (£11k personal allowance + £35k basic rate). It means that you take home less of every pound over £45k, but the amount you take home of every pound below £45k stays the same.

I think the threshold is slightly lower in Scotland?

You’ve got to add the personal allowance back on, it’s 40% tax on £33.5K AFTER allowances. Personal allowance is £11.5K.
You have to have a salary of over £45K or so to pay 40% tax of everything OVER that £45K not on everything.
It’s 20% tax on everything below.
Hope this makes sense.

i think you're maybe misunderstanding...
the tax rates apply to taxable earnings... so after his personal allowance of 11k... so the threshold for top tax rate is 34.5k + 11k...45.5k (possibly coincident with ur dhs job pay banding)

additionally, hitting this threshold doesnt mean 40% applied to all earnings... you still get your 11k tax free and 20% applied to earnings below 45.5k and the 40% applied to earnings over....

your would not hit the top rate anyway

OMG, thank you SO MUCH!!! That's brilliant news!

OP there are a couple of websites you can use to work out the tax difference. Can’t remember the exact names but google “UK tax calculator” As others have said above, it’s only the amount over the tax threshold that gets taxed at 40%

As above if you’ve no other benefits - car, healthcare etc. Then higher rate doesn’t kick in till £45k

I use this online calculator to work tax and my take home pay.

listentotaxman.com/?noredirect=1

You can also apply for married couples tax relief I think aswell where you can apply some of your unused personal allowance to him.

Oh very best of luck! This is a nice thread.....hope your DH gets that job and life becomes just a tad easier for you all! 😀

The transfer of some of your personal allowance can only happen if he’s a basic rate tax payer - if he does end up paying any higher rate tax then you’re not able to.

Married couples tax relief only exists for lower rate tax payers sadly.

Additionally the 12% NI goes down to 2% at around the same level as 40% tax kicks in,
So you actually pay 20% + 12% = 32% below the limit and 40% + 2% = 42% on the portin above the limit so it's only 10% more on the excess bit.

As your DH is a basic rate taxpayer today, go online and claim the Marriage Allowance today, as it is the last day of the current tax year. You will need to know your NI number and his and have another form of ID, such as the account number for a bank account which you receive interest on or receive certain benefits into. The allowance will be applied for the whole of the 2017/18 tax year, so DH will receive a tax refund of £220.

Good luck to him and you all