Income Tax - Basic Question?

Rasczak · 07-10-2006, 5:24 PM

Can anyone shed some light on how the Inland Revenue charge Income Tax? Their rates are currently listed as:

Starting rate: £1 to £2,150 - 10%
Basic rate: £2,151 to £33,300 - 22%
Higher rate: £33,301 - 40%

...so if you earn, for example, £33,302 does this mean you'll be charged a full 40% of that, or do they charge 10% upto £2,150, 22% upto £33,300 and 40% thereafter?

My son is about to cross the 22%/40% threshold and was wondering if he will effectively be taking a dip in income?

Ian J · 07-10-2006, 5:45 PM

No - the tax rates work in bands. The first X thousand is free of tax depending on your personal allowances. The next £2,150 is then charged at 10% and the next £21,000 at 22% and so on so the 40% rate is only charged on the income above the other bands.

I hope that makes sense

*The Dude* · 07-10-2006, 5:46 PM

you get the first £5k or so tax free (personal tax allowance, the tax code from your payslip with a zero on the end

)

then everything after that is charged accordingly.... the first 33k you pay 22%, everything after that you pay 40%.

in effect, you normally need to be earning around £38k before you hit the 40% bracket....

Rasczak · 07-10-2006, 5:57 PM

Thanks for the replies guys

Badger0-0 · 07-10-2006, 6:14 PM

And, IMO, if he's earning that much, he can afford to pay it.

I'm not trying to be provocative in saying that, I could have had a month off one year, with the extra tax I paid.
I didn't begrudge paying it though, there's a lot of people working just as hard, if not harder than me and earning a lot less

GaryB · 07-10-2006, 6:33 PM

Quote:

Originally Posted by The Dude

in effect, you normally need to be earning around £38k before you hit the 40% bracket....

...unless you have a company car. Mine eats up all of my tax free allowance and more. I've got a "K Code" which is effectively a minus allowance

Mep · 07-10-2006, 9:56 PM

Quote:

Originally Posted by Badger0-0

And, IMO, if he's earning that much, he can afford to pay it.

I'm not trying to be provocative in saying that, I could have had a month off one year, with the extra tax I paid.
I didn't begrudge paying it though, there's a lot of people working just as hard, if not harder than me and earning a lot less

so you know all about his outgoings do you? Sorry but it annoys me when people make daft assumptions like that. It's not exactly a fortune is it.

Knyght_byte · 07-10-2006, 11:26 PM

Quote:

Originally Posted by mep

so you know all about his outgoings do you? Sorry but it annoys me when people make daft assumptions like that. It's not exactly a fortune is it.

£30k+ a year is a fortune to most people...lol

and apart from a disabled partner (or himself) or elderly parents in his care, i cant see any reason myself that makes it a sob story he might lose a grand or so extra to tax.....

only usual reason to need that kind of income otherwise is if he has lots of kids...well, sorry, thats his own fault if its needed to support a load of kids, he needs to keep his libido in check or get better protection...lol

i've nothing against people doing well, but once you get to that sort of wage level and above, most people start finding ways to avoid paying tax at all.....which sucks because it just ends up meaning the people earning less have to pay more to make up for it........if they made the tax rate the same at all levels but made sure no one could avoid it, tax could be set to 15% all the way up the earnings scale.....but the big earners find ways to avoid it...or most of it anyhow....

anyhow, rant over...heh

indianwells · 08-10-2006, 7:30 AM

Quote:

Originally Posted by Knyght_byte

£30k+ a year is a fortune to most people...lol

and apart from a disabled partner (or himself) or elderly parents in his care, i cant see any reason myself that makes it a sob story he might lose a grand or so extra to tax.....

only usual reason to need that kind of income otherwise is if he has lots of kids...well, sorry, thats his own fault if its needed to support a load of kids, he needs to keep his libido in check or get better protection...lol

i've nothing against people doing well, but once you get to that sort of wage level and above, most people start finding ways to avoid paying tax at all.....which sucks because it just ends up meaning the people earning less have to pay more to make up for it........if they made the tax rate the same at all levels but made sure no one could avoid it, tax could be set to 15% all the way up the earnings scale.....but the big earners find ways to avoid it...or most of it anyhow....

anyhow, rant over...heh

Is that you Fidel?I thought you were ill.

Ian J · 08-10-2006, 7:49 AM

What an odd response from some of you. The OP clearly didn't understand how the Income Tax banding worked thinking that the top rate of tax would be applied to all earnings if you earned over a certain amount.

If that were the case his son would end up earning considerably less net income if his earnings crept over a certain amount. Luckily that isn't the case but he asked for clarity on the regulations and not a sermon on the evils of earning too much.

bobsplace · 08-10-2006, 8:40 AM

Quote:

Originally Posted by Ian J

What an odd response from some of you. The OP clearly didn't understand how the Income Tax banding worked thinking that the top rate of tax would be applied to all earnings if you earned over a certain amount.

If that were the case his son would end up earning considerably less net income if his earnings crept over a certain amount. Luckily that isn't the case but he asked for clarity on the regulations and not a sermon on the evils of earning too much.

Here here...why does every question on here turn into a "kangaroo court"

***...rant over....

Badger0-0 · 08-10-2006, 9:18 AM

Quote:

Originally Posted by Ian J

What an odd response from some of you. The OP clearly didn't understand how the Income Tax banding worked thinking that the top rate of tax would be applied to all earnings if you earned over a certain amount.

If that were the case his son would end up earning considerably less net income if his earnings crept over a certain amount. Luckily that isn't the case but he asked for clarity on the regulations and not a sermon on the evils of earning too much.

I guessed it would be emotive, hence the

I don't think anyone was calling it evil to earn good money.
Personally, I don't care if tax is 99%, I'm more worried about what I actually get.
But KB's point about evasion is good. I certainly know loads of people who are on the fiddle, tax-wise. Not that I'm suggesting the OP is trying to evade, I understand he was only asking his rights

And whilst I agree it isn't a fortune, it certainly isn't bad either.
I probably should have kept my nose out, but, oh well..........

Knyght_byte · 08-10-2006, 3:58 PM

Quote:

Originally Posted by indianwells

Is that you Fidel?I thought you were ill.

?

whats wrong with expecting everyone to pay the same percentage of their earnings? if they all actually paid it then the treasury would be in a much better position....

Mep · 08-10-2006, 4:07 PM

Well I pay a lot more in tax each year than the OP's son earns......I can assure you I don't avoid paying anything.

scouse · 08-10-2006, 4:09 PM

slightly off topic, but what is the rationale behind banding and levels as opposed to the straight one set percentage that knyte-byte suggests?

Moviebuff · 08-10-2006, 4:21 PM

Quote:

Originally Posted by Knyght_byte

?

whats wrong with expecting everyone to pay the same percentage of their earnings? if they all actually paid it then the treasury would be in a much better position....

Yeah - to waste even more money than they do currently!

Knyght_byte · 08-10-2006, 4:24 PM

Quote:

Originally Posted by Scouse

slightly off topic, but what is the rationale behind banding and levels as opposed to the straight one set percentage that knyte-byte suggests?

simple, the goverment knows that a lot of upper wage level earners will always try and avoid paying tax, so if we all paid 15%, the upper wage level earners that try and avoid it would end up paying almost zero actual money....whereas if they have to pay a much higher percentage then there is less they can get away with so still end up paying a more reasonable amount....however, as lifestyle goes, the lower rate earners still lose more out of the income in respect to living costs than the upper level will......

now i dont mind people earning a fortune, i'm actually one of few who respect Bill Gates for earning his money by bringing the world closer by forcing windows upon us....(not gonna get in to that arguement now tho, just using him as an example in the first instance of this paragraph), if they put in the effort then they deserve it, if however they dont put in the effort, in a way thats useful to others, but simply do things like acquisition and assett stripping then i get a little annoyed, those are the folks most likely to avoid paying taxes, also celebrities......i dont mind the hard working ones like the old Ealing crowd or similar, but these new world ones who do bugger all and get paid a fortune, AND STILL need to resort to tax dodging...it annoys me.........this is one reason i like Angelina Jolie, not only is she staggeringly beautiful but she does put her money to good use.....whereas most other movie stars only do good stuff to get good publicity.....and they tax dodge, Anglina does good stuff to get good publicity so she can do more good stuff.....she probably does a bit of tax dodging, or rather her agent will, but she puts the money back.........then look at goverment ministers, supposedly you go to government to make a differnce, it seems nowadays most do it to get a tax free expense account so they can enjoy life!...i wouldnt mind if they were doing good even! most just want that nice life and a chance to stand on a soapbox and make crass decisions......

but if everyone HAD to pay the 15% (just a figure out of thin air ok, not a hard figure after having researched the entire worlds economy...so no flaming please...lol) same rate and there was no get out clauses on things like 'oh i bought that Apple Ipod for work use, it helped me meditate inbetween meetings'....then there would be a lot more money coming in to the treasury, and with a goverment who could actually use it efficiently then things like the NHS wouldnt be on the brink of collapsing in to an even more farcical state than it is already....

anyhow, this is way too deep for a pleasant sunday afternoon...lol....i'll leave it here before i go in to P&N mode....(Politics&News)

Mep · 08-10-2006, 5:02 PM

I think 15% is a marvellous idea! ;-)

*The Dude* · 08-10-2006, 10:37 PM

Mep, I think somebody is maybe getting a bit confused as to how taxation actually works...

Mep · 08-10-2006, 10:39 PM

you think so?

*The Dude* · 08-10-2006, 10:47 PM

just maybe ever so slightly confused.

Ian J · 09-10-2006, 6:22 AM

Quote:

Originally Posted by mep

I think 15% is a marvellous idea! ;-)

Let's start a new political party

Mep · 09-10-2006, 6:39 AM

OK, I'll be the one who sleeps with my secretary....what will you do?

Ian J · 09-10-2006, 7:17 AM

I'll be your secretary

Mep · 09-10-2006, 7:33 AM

aaah Ok it's going to be that kind of party is it

wavefront · 09-10-2006, 8:18 AM

Quote:

Originally Posted by Knyght_byte

only usual reason to need that kind of income otherwise is if he has lots of kids...well, sorry, thats his own fault if its needed to support a load of kids, he needs to keep his libido in check or get better protection...lol

The only reason to need higher income is if you have kids? I think not!

As for tax bands go don't forget the hidden bands that are implemented via tax credits. I remember seeing an item on the news that said a family with kids can effectively earn £23k without paying tax at all