How much can you earn a year before you pay 40% Tax?

[dropinthe]

Dont expect this thread to be very long but could do with the answer ASAP! Cheers!!

think it's £32,785

Reliable source? So if you earnt £35k you would only pay 40% on the difference??

You only pay 40% on the difference dropinthe, but I am not sure what the threshold is. (Dh could tell you!)

Hows the dirty looks going,LM??

BBC report - 2005/6 threshold is £37,296. That's after deductions (eg company cars) and adjustments the other way (eg pensions contributions).

Cheers!!

And if you get a cash bonus it really cuts it in half
We used to holiday overseas, now we don't holiday at all!!!

Don't forget that if it is subject to NI then you pay the extra 1% over the limit to - so you're taxed at 41%.

JanH - how do you calculate deductions for company cars then? Dh earns very sligthtly above hte threshold, so will pay 40% tax on the company car. How could he reduce his salary so he only has to pay car tax at 22% rather than 40%. Or is this not possible?

try this link to calculate the liability of the car

here

If he earns just above the threshold he may not go into higher rate, and even if he does it's only on the bit above the threshold, not the whole lot. table of allowances and tax bands .

His tax coding notice will have on the LH side his allowances (personal income allowance, pension contributions, gift aid etc) and on the R his deductions (car, petrol, unpaid tax from last year to be recouped this year). The difference between the two is the amount which is tax-free and brings down the tax thresholds.

Simple example - if his car is assessed at £3000 (depends on price and emissions), that would be deducted from £4895 (personal allowance for 05-06) and he would then pay

10% on 1895 - 3985
22% on 3986 - 34295
40% on 34296 onwards.

HTH

oh Jan, you are so clever at this kind of thing

Gulp - it's still going to cost £120 a month in tax alone. Plus the loss of car allowance. Is it really worht it me thinks....

You need to do the sums titchy, including factoring in the loss of car allowance. Remember you won't have to save up for a car, or pay for tax, insurance and MOT or repairs (I assume). Work out how much you spend on the car now and you'll probably find that its worth it. Not free, obviously, but actually £1500 a year for a car is not that bad! hth