Page 8 | To be annoyed at the new tax brackets?

Justbrowsing2024 · 2025-02-26T19:44:16+00:00

Means myself and lots of people I know will need to pay 40% tax. The new thresholds being lowered means we will be worse off at a time when everything is going up. I know it's only on a proportion of salary but it's a proportion that was going towards the increase in mortgage (due to come off an amazing low rate), imminent increase in childcare fees, council tax and everything else. I know it's affecting so many people but today I have felt really flat. I'm not anywhere near the top of the threshold (£45500 salary) and unlikely to get a payrise. I'm sure tomorrow will feel brighter but feel free to join my pity party

YouDeserveBetterSoAskForIt · 26/02/2025 23:02

Wow. I am pretty disgusted by some of the comments here.

There's many, many reasons why this topic can be confusing and stressful for some people.

It doesn't make them stupid or dumb or illiterate.

Honestly, how nasty.

I guarantee there's many things some of you find extremely difficult that others find easy. I hope no one sneers at you, when you are struggling.

fashionqueen0123 · 26/02/2025 23:05

Merryoldgoat · 26/02/2025 19:53

I honestly don’t understand how people can be believing this shit.

And earning those wages!! Scary

fashionqueen0123 · 26/02/2025 23:14

PandoraSox · 26/02/2025 20:29

Didn't any of you think it odd there was no mention in the media of a massive tax hike?

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Or check the previous year on the webpage and see it was the same 🙈

Redburnett · 26/02/2025 23:19

Does OP seriously think if the thresholds had changed that much it would not have been big national news?

m00rfarm · 26/02/2025 23:24

I honestly don't believe that those who thought this was a 12k decrease actually earn enough money to have been caught up in it.

ByQuaintAzureWasp · 26/02/2025 23:25

How are you paying 40% tax if you earn £45500? ... not according to government website

rainbowunicorn · 26/02/2025 23:36

Merryoldgoat · 26/02/2025 19:56

You honestly think that they’ll just increase tax by £400 a month for a load of people without warning?

I’m starting to understand what it means when people quote the average reading age being 10 in The UK.

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Absolutely. It is worrying that there is such a poor level of comprehension.

Negroany · 26/02/2025 23:43

NewJobityJob · 26/02/2025 20:26

Yes but only £7k tax free, I’ve earnt £45k but paid 40% tax on the last £1.5kish so it’s kicked in £5k before £50k

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You have to add the cost of the healthcare to youfr "earnings". So cash earnings £45k, benefits in kind, £7.5k. They are part of your earnings. If they weren't, you'd get them tax free and that obviously isn't right.

Stick £1,500 in your pension before the end of the tax year, get a 20% uplift on it in your pension and a 20% rebate. Sorted.

Or dump the healthcare if you don't like the cost of it, it's not compulsory to take it.

Angrymum22 · 26/02/2025 23:50

Musicaltheatremum · 26/02/2025 22:59

I can see where op got confused. It does read as an awful increase if you don't read it slowly and in context, but honestly there would have been an outcry had it been true.

My husband's tax code dropped dramatically when he got his state pension because they had to take all the tax from his private pension as there is not a mechanism to tax the state pension. So he gets his state pension tax free but his other pensions he gets no allowance on one and only a couple of thousand on the other.

It’s the same when you have untaxed interest in savings. They also estimate it for the current year. The interest rate is now around 1.7% on one of my accounts down from 4.6% from the year they have used to estimate it. So my PAYE code on my pension has been changed to tax money I haven’t received. Fortunately I am still self employed so the dip in my pension is covered by earnings. I’m new to PAYE but being on self assessment means I’m used to paying tax, estimated, a year ahead. Hopefully by June they will have corrected my PAYE code so we can eat again.
Im working an extra day in Feb & March so should be ok.
It all evens out but it’s crap for budgeting. I’m spending the weekend doing my accounts so I can transfer money into my private pension and avoid the 40% tax on earnings.
Being self employed isn’t much fun when it comes to tax. It catches the novices out when you realise that an upturn in profit means a massive tax bill. Then the estimated pay in advance bill also increases whether the upturn continues or not.
I ran my own business for years. Working out the wages every week in the early days was a bloody nightmare. We had to do it all by hand using tax tables and fingers.
I was so relived when computers took over. Then they complicated it further with RTS. I don’t miss it or the time it took to explain to staff why their tax or NI was necessary.
Which reminds me I need to look out for DS’s tax refund and help him chase it up.

rainbowunicorn · 26/02/2025 23:50

NewJobityJob · 26/02/2025 20:15

Interesting this has been posted today and maybe I fall into the ‘thick’ bracket but I never realised that if your tax code is reduced (mine is £7200 ish to account for medical insurance) that it also reduces the next bracket, so I still get £33770 at 20% but means I hit 40% at £45k ish instead of £50k.

Genuinely didn’t know this, and didn’t expect to hit the 40% bracket but have done this month.

No, you have misunderstood. You re still getting your personal allowance. You are just using some of it up with the medical insurance. If you add the amount of the insurance and the personal allowance you have it will be the standard personal allowance amount. You aren't going into the higher bracket any sooner than you should. Presumably your insurance is worth in the region of 5k.

Negroany · 26/02/2025 23:56

Justbrowsing2024 · 26/02/2025 20:51

Thank you for explaining, I feel much better. And for those that had to be mean, I hope you feel better now lol.
I had no reason to doubt so many people at work. They aren't thick, can read, don't have the reading age of a 10 year old etc etc. It isn't explained on the website in the same way it has been in previous years so it wasnt clear to me. I looked at the website and it seemed to confirm what I had been told. I also haven't received a letter.
Happy to be wrong!

Did it not occur to you that the reason you hadn't received a letter was because there was nothing they needed to write to you about because there's no change?

I have seen this floating about on social media. Martin Lewis even did a post to explain it recently. I can't really understand why or how this misinformation has come about but it's pretty insidious of someone/thing.

rainbowunicorn · 27/02/2025 00:01

NewJobityJob · 26/02/2025 20:28

Yes, but I expected to pay 20% on everything between £7840 and £50k, I’ve started paying 40% at £45k

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You haven't though. You have had the benefit of the medical insurance which should just be viewed as part of your salary. So that part of your salary is worth just under 5k per year then you have your £7840 bringing you to the standard £12570 personal allowance. You then pay 20% tax in the first bracket and move up to 40% at 50k.
You can't just pretend that the medical insurance isn't a part of you salary.

rainbowunicorn · 27/02/2025 00:12

NewJobityJob · 26/02/2025 20:33

Thanks, always thought 40% kicked in at £50k, I never realised that a reduction in my tax code would reduce this.

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But you have to pay tax on the benefit you have in the form of the insurance. The only way to do this is to reduce your personal allowance.
Put it another way. If your employer paid you an extra 5k a year but told you to sort your own insurance out with the extra 5k it would give you the same result in the end.
I don't know how else to try and explain it as you seem to think you are being done out of 5k personal personal allowance which just isn't true. It is just that it has been given to you as a taxable benefit. All the numbers add up correctly.

rainbowunicorn · 27/02/2025 00:17

valder · 26/02/2025 20:38

Hands up all the superior beings who are sneery accountants? Lots I reckon. The rest of us are not and expect things to be explained in simple English with examples where necessary.

The confusion that abounds about this is a case in point.

It is written in simple English though. It is very easy to understand.
You have a personal allowance which may vary depending on your circumstances. Once your personal allowance is used up you pay tax at the appropriate rate for each band. It really couldn't be clearer.

rainbowunicorn · 27/02/2025 00:25

Merryoldgoat · 26/02/2025 20:49

People understand earnings to be money they receive and from which tax is deducted - salary, car allowances, London weighting etc. It’s tangible - it’s cash.

Benefits which are received paid for by an employer (PMI etc) are not tangible in the same way - it’s non-cash - a notional payment.

Frankly when they make payrolling mandatory it will be far easier. But when it’s on your payslip you won’t be PAID the money and THEN deducted (as in earnings) - your benefit is given a value and the appropriate tax deducted.

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I think people are just trying to explain it in a simple way to show that the medical insurance has to be taken as part of the salary and not some kind of freebie that does not attract tax.

Negroany · 27/02/2025 00:27

rainbowunicorn · 27/02/2025 00:12

But you have to pay tax on the benefit you have in the form of the insurance. The only way to do this is to reduce your personal allowance.
Put it another way. If your employer paid you an extra 5k a year but told you to sort your own insurance out with the extra 5k it would give you the same result in the end.
I don't know how else to try and explain it as you seem to think you are being done out of 5k personal personal allowance which just isn't true. It is just that it has been given to you as a taxable benefit. All the numbers add up correctly.

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It's not the "only way to do it", in fact it's quite an outdated way. With rti and digital tax etc most employers now just add the monthly cost of the benefit into the payslip and show it as a cost and the tax comes off the same way it does for salary. Tax code remains the same. It's a bit easier for people to understand and no P11Ds.

YourFlawIsLava · 27/02/2025 00:35

PandaTime · 26/02/2025 22:38

@NewJobityJob I can see this is pickling your brain. See if this makes sense for you -

(For simplicity, let's say you earn exactly £46k and MI is exactly £5k.)

----------

John earns £51k per year (£46k plus £5k). His tax code is the standard 1257L.

This means he pays 20% tax on earnings from £12,571 to £50,270 and 40% tax on earnings from £50,271 to £125,100.

On a salary of £51k, he would be taxed:
20% on £37,699 (£50,270-£12,571)
40% on £729 (£51,000-£50,270)

----------

You earn £46k and receive £5k of medical insurance.

Your tax code is reduced by £5k to 757L.

This means you pay 20% tax on earnings from £7571 to £45,270 and 40% tax on earnings from £45,271 to £120,100.

On a salary of £46k, this means you are taxed:
20% on £37,699 (£45,270-£7,571)
40% on £729 (£46,000-£45,271)

It is exactly the same. 🤗

I can't speak for @NewJobityJob but I think this is exactly what they thought was happening. It's exactly what I thought was happening and when I said to HMRC, they said this wouldn't happen.

My example. My tax code is 240L from April due to my work messing up my p11D and then HMRC taking 5 months to do anything about the amendment. With my car alone it should be something like 649L. So I believe I can only earn 39k ish before I pay 40% tax which means I am paying it on approx 4k of my salary that I wouldn't be if this error hadn't happened. Therefore I will be paying more tax than I would have been if this error hadn't happened as 20% over 2 years is probably less than a little bit 40% over one of the years. But she told me my tax free allowance is still 12750 but the reduced tax allowance is solely to claim that additional and not knock me over.

PandaTime · 27/02/2025 02:26

YourFlawIsLava · 27/02/2025 00:35

I can't speak for @NewJobityJob but I think this is exactly what they thought was happening. It's exactly what I thought was happening and when I said to HMRC, they said this wouldn't happen.

My example. My tax code is 240L from April due to my work messing up my p11D and then HMRC taking 5 months to do anything about the amendment. With my car alone it should be something like 649L. So I believe I can only earn 39k ish before I pay 40% tax which means I am paying it on approx 4k of my salary that I wouldn't be if this error hadn't happened. Therefore I will be paying more tax than I would have been if this error hadn't happened as 20% over 2 years is probably less than a little bit 40% over one of the years. But she told me my tax free allowance is still 12750 but the reduced tax allowance is solely to claim that additional and not knock me over.

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Your situation is a bit more complicated because it involves tax owed for a period of time which they are now making you pay via next year's tax code. If I'm understanding correctly, the underpaying happened over 2 years? If so, have you asked if you can pay the tax owed as a lump sum rather than via your tax code?

ColourBlueColourPurple · 27/02/2025 02:59

Merryoldgoat · 26/02/2025 19:56

You honestly think that they’ll just increase tax by £400 a month for a load of people without warning?

I’m starting to understand what it means when people quote the average reading age being 10 in The UK.

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Surely there's no need to be so rude? Have you never misunderstood something then when it's been pointed out to you, been like "oh!". I know I have.

tilypu · 27/02/2025 06:24

YourFlawIsLava · 27/02/2025 00:35

I can't speak for @NewJobityJob but I think this is exactly what they thought was happening. It's exactly what I thought was happening and when I said to HMRC, they said this wouldn't happen.

My example. My tax code is 240L from April due to my work messing up my p11D and then HMRC taking 5 months to do anything about the amendment. With my car alone it should be something like 649L. So I believe I can only earn 39k ish before I pay 40% tax which means I am paying it on approx 4k of my salary that I wouldn't be if this error hadn't happened. Therefore I will be paying more tax than I would have been if this error hadn't happened as 20% over 2 years is probably less than a little bit 40% over one of the years. But she told me my tax free allowance is still 12750 but the reduced tax allowance is solely to claim that additional and not knock me over.

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It's possible that in the short term you will pay more tax, because you've gone into the 40% tax bracket - but every year's tax is calculated individually, and if you do overpay you will get any overpayment back - again, that might be through an adjusted tax code.

YourFlawIsLava · 27/02/2025 06:52

Hi @PandaTime thanks for taking the time. Yes, It's tax which is owed from the current year that's ending and will be paid back next year. It totals £1200. I asked if it could be paid as a lump sum and they said as it's not available to pay in the app, I'd have to send a cheque. I don't have a cheque book, the bank is rarely open to get one issued and they took from July to December to action the p11D amendment so I imagine if I make a payment separately, it will just confuse the system as I will have already started paying it via the tax code. At least this way it's done and dusted but I am fuming about it as my hands are tied.

Thanks also @tilypu unfortunately it's all underpayment 😭

LittleBearPad · 27/02/2025 08:06

Angrymum22 · 26/02/2025 23:50

It’s the same when you have untaxed interest in savings. They also estimate it for the current year. The interest rate is now around 1.7% on one of my accounts down from 4.6% from the year they have used to estimate it. So my PAYE code on my pension has been changed to tax money I haven’t received. Fortunately I am still self employed so the dip in my pension is covered by earnings. I’m new to PAYE but being on self assessment means I’m used to paying tax, estimated, a year ahead. Hopefully by June they will have corrected my PAYE code so we can eat again.
Im working an extra day in Feb & March so should be ok.
It all evens out but it’s crap for budgeting. I’m spending the weekend doing my accounts so I can transfer money into my private pension and avoid the 40% tax on earnings.
Being self employed isn’t much fun when it comes to tax. It catches the novices out when you realise that an upturn in profit means a massive tax bill. Then the estimated pay in advance bill also increases whether the upturn continues or not.
I ran my own business for years. Working out the wages every week in the early days was a bloody nightmare. We had to do it all by hand using tax tables and fingers.
I was so relived when computers took over. Then they complicated it further with RTS. I don’t miss it or the time it took to explain to staff why their tax or NI was necessary.
Which reminds me I need to look out for DS’s tax refund and help him chase it up.

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You can amend your estimated interest income through the HMRC website - it will update your tax code. No need to wait until June.

BurntBroccoli · 27/02/2025 08:31

Schoolchoicesucks · 26/02/2025 20:07

Curious where OP has come across this without googling news coverage or even HMRC website which surely would have cleared up by showing year on year figures.

OP, you've misunderstood. You're still going to be paying 20% on some of your income (and 0% on some). No 40% in sight.

There are so many disinformation posts circling on Facebook/TikTok at the moment (Reform voters usually) that I wouldn't be surprised if OP picked it up from there.

tilypu · 27/02/2025 09:28

YourFlawIsLava · 27/02/2025 06:52

Hi @PandaTime thanks for taking the time. Yes, It's tax which is owed from the current year that's ending and will be paid back next year. It totals £1200. I asked if it could be paid as a lump sum and they said as it's not available to pay in the app, I'd have to send a cheque. I don't have a cheque book, the bank is rarely open to get one issued and they took from July to December to action the p11D amendment so I imagine if I make a payment separately, it will just confuse the system as I will have already started paying it via the tax code. At least this way it's done and dusted but I am fuming about it as my hands are tied.

Thanks also @tilypu unfortunately it's all underpayment 😭

I mean if you overpay the underpayment due to ending up in the higher tax bracket.

It's very unlikely to be the case though.

YourFlawIsLava · 27/02/2025 10:12

tilypu · 27/02/2025 09:28

I mean if you overpay the underpayment due to ending up in the higher tax bracket.

It's very unlikely to be the case though.

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Ah, I see. I was optimistically assuming that after this it would be accurate. It has never happened historically so I’m not sure where that came from. As they say, it really is always something!