Higher tax bracket

[cloudy477654]

Wondering if anyone can help... I earn 40k, DH on 45k so we're comfortable.
I'm job searching atm as I want a new challenge. DH is on a 2 year contract so looking to progress in a year or so.
Aware that some jobs I'm looking at would put me just above the higher rate tax and that would actually mean I'm worse off?
How much more would we need to earn to mean we actually bring home more money each month? Is 55k + about right?
Not going through the stress of changing jobs if I'm going to be poorer!

Why would you be worse off? You only pay the higher rate on earnings about 50k, so it might not make as big a difference as you expect but you shouldn't lose money by earning more.

The smart thing to do is to put the extra in your pension as that isn't subject to tax. It's what I did when I reached that level, and now in retirement, I'm benefitting.

But it’s taxed at the higher rate only over that band isn’t it? So the only issue is if you were receiving CB or something where it stops over a certain earnings?

Don’t forget your pension contributions don’t count…

Yes but if I get a new job on say 48k then progress in that job I would be into the higher rate quite quickly and end up with less or about the same take home pay as I'm on now?
Or if I get a new job on 51k which is a nice pay rise on paper but in reality I'm going to pay more tax than I do now so actually end up with less money?
Unless I'm completely misunderstanding!

Good point about the pension! Yes that makes a difference then

Add up your potential income from work and any interest on savings outside ISAs deduct your tax free allowances (income and savings) and see how much you have to declare. Repeat for different levels of income.

You will be better off if you earn more. The higher rate only applies on earnings over the threshold, so you would be paying 20% tax for earnings over the tax free allowance up to the higher level (about £50,000, look it up) and 40% tax on income over the higher income level. You pay an extra 20% in tax on that increment.

Might get more complicated if you are over the next higher level, but that's over £100,000.

Oh ok this is the bit I was getting wrong then thanks!
I'm quite risk averse I think so moving jobs is a big deal for me so didn't want to make a silly mistake when negotiating pay!

You are completely misunderstanding how the tax system works. You’ll pay 40% tax on earnings above c £50k, your earnings below that will be taxed in the same way as now.

If you claim child benefit then it will start to be clawed back, in which case consider increasing your pension contributions to keep it.

This tool helps you understand take home:

www.thesalarycalculator.co.uk/salary.php

You will pay a bit more tax. It's 40% on the increment over the higher rate, nothing changes for your earnings under that threshold 0% below the tax threshold and 20% up to the higher level. If we assume the higher rate starts at £50,000 if you earned £51,000 you would only pay 40% tax on £1,000.

There are plenty of on line tools that will let you work out tax/ni etc on any given level of income.

The issue I think is that once you start to lose Child Benefit you see very little of every extra £ though I think Hunt's last budget provided some amelioration.

Over £60k you might lose child benefit.

Over £100k you'd lose 'free' childcare hours.

Otherwise you'll almost always be better off on a higher salary. It's only bit over £50k that is taxed at the higher rate.

And, don’t forget that while tax goes up, NI goes down.

You will never be worse off earning more money. Tax is banded

Up to 12k - tax free
12k to 50k - basic 20% tax
50k to 125k - higher 40% tax

You only get taxed 40% on anything above 50k. You will get taxed 20% on the first 40k (except the first 12k which is tax free)