Question about income tax thresholds and personal allowance

[ifigoup]

Let's say my salary is £40K gross. It's taxed at source via PAYE, so what I actually take home each month is (1/12 of £40K) minus tax.

Let's say I get a promotion such that my new salary is £46K, still taxed at source via PAYE. Am I now classed as a higher-rate (40%) taxpayer since I earn more than £45K?

This is what I don't understand:

Everyone has a tax-free personal allowance of £11,500 on which they're not taxed. My stupid question is whether the tax thresholds already take this into account. In other words, if on paper my new salary is £46K before tax, can I subtract £11,500 from that and reckon that only £34,500 is taxable? That is, do I actually need to be earning £56,500 (£45K plus personal allowance of £11,500) before I'm liable to pay higher-rate tax?

It seems like this should be obvious, but it isn't to me.

HRT kicks in at 33500 plus your personal allowance (not everyone has 11500 personal allowance).

The year your salary changes your total earnings won't be the new salary.
Say you earn 40k for 6 months, then 46k for 6 months, you will earn 43000 over the year, and be taxed on 31500 if your personal allowance is 11500

I see. Thank you. Yes, that's clear. And things like childcare vouchers and travel vouchers that are taken at source would change it too, wouldn't they? So say I earned £46K on paper but sacrificed £2K in childcare vouchers, I'd still be below the threshold?

Also remember that the 40% is only on the part of your earnings above the limit .....
the first £33k of your income over the tax free bit will still be taxed at basic rate
its not a cliff edge

Oh, Talkinpeace, thank you! I had no idea that that was the case. That's a much fairer system.

Yup : if its a £46k salary your bill is :

£11500 at 0% tax = £0
£31500 at 20% tax = £6300
£3000 at 40% tax = £3000
Total = £9300

and then NI
0% on £8060 = 0
12% on £34944 = 4193
2% on £ 2996 = £240
total = £4433

So take home = £46000 - £9300 - £4433 = £32267 per year
= £2689 per month
(depending on your tax code and pension status and stuff)

I really am an idiot about this stuff. Thank you for spelling it out.

You are not an idiot - it is stupidly complicated stuff designed to befuddle people.

But I do happen to be an accountant working on Tax returns at the moment

£3000 at40% tax is not £3000 it is 1200

My bad
must get a new calculator (current one is 25 years old and only works in bright light) !!
Lower tax bill for ifi then