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Marginal Tax Rate For Income £100,000 - £115,000


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#1 tatty

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Posted 19 February 2012 - 10:16 PM

I've been trying to work this out after a conversation at work the other day (doesn't affect me unfortunately).

I get it that for every £2 over £100,000 you lose £1 off your allowance of c£7500 which is why £115,000 is the upper level for this marginal rate.

What i'm not sure of is what the total tax take is.

1. Are you taxed at 20% or 40% on the c£7500 you lose?

2. Does employee NI stop at c£40,000 for 12% with 2% on everything above?



I've seen websites saying the marginal rate is 61.5% so i assume it works out as this:

40% of the £15,000 = £6000

40% of c£7500 = £3000

2% of £15,000 = £300


Total c£9,300 = c62% of £15,000



Is this right?

#2 tatty

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Posted 19 February 2012 - 10:22 PM

And a supplementary:

Would contributions to a sipp or payments for a company organised green car lease scheme be deducted before you paid the c62% tax if the costs/payments were exactly £15,000 (assuming you were paid £115,000).

#3 57percent

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Posted 19 February 2012 - 10:36 PM

40% of the £15,000 = £6000

40% of c£7500 = £3000

2% of £15,000 = £300


Total c£9,300 = c62% of £15,000



Is this right?


Yes, looks correct.
Plus 13.8% employees national insurance (although taken before you're left with you 'wage')

#4 tatty

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Posted 19 February 2012 - 10:42 PM

Yes, looks correct.
Plus 13.8% employees national insurance (although taken before you're left with you 'wage')



I understood that NI is 2% over c£40,000 or are you saying you get hit for 12% on the £7,500 on top of the 40% income tax?

It seems pretty harsh to tax the allowance loss at 40% rather than 20%.

#5 57percent

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Posted 19 February 2012 - 10:58 PM

I understood that NI is 2% over c£40,000 or are you saying you get hit for 12% on the £7,500 on top of the 40% income tax?

It seems pretty harsh to tax the allowance loss at 40% rather than 20%.


Sorry, I meant employer, not employee.

As far as I'm aware, there's no change for NI, so still 2%, but hidden on the other side, the employer has already paid 13.8%, which is really just income tax too.

#6 tatty

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Posted 19 February 2012 - 11:49 PM

Sorry, I meant employer, not employee.

As far as I'm aware, there's no change for NI, so still 2%, but hidden on the other side, the employer has already paid 13.8%, which is really just income tax too.


Thanks, any ideas about the sipps etc being paid before tax/ni?

#7 hotairmail

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Posted 20 February 2012 - 12:02 AM

recent hl article


http://www.hl.co.uk/...rate-tax-relief

You could get up to 60% tax relief if you earn more than £100,000
The government takes away £1 of your tax-free personal allowance for each £2 you earn over £100,000. This means you will lose your tax-free personal allowance completely if your income exceeds £114,950.

Making a pension contribution will reduce your income for these purposes. Get it below £100,000 and you could claw back your full personal allowance as well as getting 40% tax relief on your contribution. This means up to 60% tax relief for those earning between £100,000 and £114,950.

Even if you earn above £114,950 you can claim your personal allowance back by making a SIPP contribution, in which case the tax relief you receive will be between 40% and 60% depending on how much you earn, which is still an extremely attractive deal.

You must pay sufficient tax at the additional or higher rate to claim the full additional or higher rate tax relief via your tax return. Remember tax rules can change over time and the relief you receive will depend upon your circumstances.


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#8 porca misèria

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Posted 20 February 2012 - 01:06 AM

You can calculate it more than one way, and it differs depending on how your income arises. The highest taxes are, as ever, on earned income.

My calculation says the marginal rate is 75.8% (for PAYE earnings).
Rationale: if you earn in that bracket and get a £1000 payrise, HMRC takes an additional £758.

The breakdown of that is:
£400 headline tax rate
£500 loss from personal allowance, taxed at 40% for another £200
£138 employer's National Insurance (the regular jobs tax).
£20 employee's National Insurance.
Total: £758.

Last year my taxable income would've fallen right into that bracket if I hadn't taken the avoidance measures it provokes.

#9 trippytinker

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Posted 20 February 2012 - 07:13 AM

there was an artical in the Telegraph yesterday ' How to get an £11,000 pension for just £2,250 ' affects the same income

http://www.telegraph...-just-2250.html

#10 Nationalist

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Posted 20 February 2012 - 08:56 AM

We may find that these avoidance schemes get revoked in the budget on the 21st of next month. If the rules don't change I'm planning "salary sacrifice" from April - the key thing to watch out for here is not to affect your entitlement to S2P.

#11 Self Employed Youth

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Posted 20 February 2012 - 10:20 AM

You can calculate it more than one way, and it differs depending on how your income arises. The highest taxes are, as ever, on earned income.

My calculation says the marginal rate is 75.8% (for PAYE earnings).
Rationale: if you earn in that bracket and get a £1000 payrise, HMRC takes an additional £758.

The breakdown of that is:
£400 headline tax rate
£500 loss from personal allowance, taxed at 40% for another £200
£138 employer's National Insurance (the regular jobs tax).
£20 employee's National Insurance.
Total: £758.

Last year my taxable income would've fallen right into that bracket if I hadn't taken the avoidance measures it provokes.


If your including the employee NI, then I should include that with my effective tax rates, pushing the 117% band up to 130.8%.

In your scenario the person could also be paying the 9% graduate tax too.
Have I not reason to lament what man has mas made of man?

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#12 porca misèria

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Posted 20 February 2012 - 12:56 PM

If your including the employee NI, then I should include that with my effective tax rates, pushing the 117% band up to 130.8%.

In your scenario the person could also be paying the 9% graduate tax too.

I know that effective rates on very low incomes are the biggest outrage of all. But surely that only applies to incomes below the NI threshold? Once you're paying NI you're on an adequate income for the basics.

OK, I guess you're in the overlap band, with income that's adequate but still below the level of benefits for the 100%-lazy?

#13 Self Employed Youth

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Posted 20 February 2012 - 01:19 PM

I know that effective rates on very low incomes are the biggest outrage of all. But surely that only applies to incomes below the NI threshold? Once you're paying NI you're on an adequate income for the basics.

OK, I guess you're in the overlap band, with income that's adequate but still below the level of benefits for the 100%-lazy?


JSA + hb + ctb exceeds NI and 20% tax threshold.

So after JSA reduced @ rate of 100%, you face 85% (hb rate of 65% + ctb rate of 20%).

Hit NI and tax threshold. 65(hb) +20(ctb) +12(NI) +20(BR tax) +13.8 (employer NI) = 130.8%

And I wouldn't call £150 a week adequate when your rent is practically half that amount.

I need roughly 32 hours work/week to break free of benefits. After that the EMTR reduces to NI (12%) + tax (20%) + employer NI (13.8%) - 45.8%, until I hit SLC threshold and then you can add another 9% on.

This doesn't include work clothing or bus fares. (I also neglected the £5 income disregard - you can earn a fiver a week without being taxed upon it, consider it a 48 minute band of 0% tax at the start)
Have I not reason to lament what man has mas made of man?

Initially 'Unemployed Youth'
Then 'Formerly Unemployed Youth'
Then 'Unemployed Again Youth'
Hopefully soon to be 'Employed Again Youth' and not long after that I'll be eligible for working tax credits, if not I'll at least get adult rate dole and maybe car insurance will be potentially affordable!

#14 porca misèria

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Posted 20 February 2012 - 01:44 PM

JSA + hb + ctb exceeds NI and 20% tax threshold.

Yes, I realise that. Thanks for filling out the details that arrive at your effective rate!

And I wouldn't call £150 a week adequate when your rent is practically half that amount.

I'd call that very adequate. Positively rich by any historic standard (and doubly so if that rent gets you a room of your own)! Yes, it's near the bottom of the pile, but it's a lot better than what I had as a new graduate. Let alone later as proprietor of a business that was failing to generate revenue, when my effective tax rate was around 300%.

Don't give up! You may never be top of the pile, but you can work your way up to something middling!

#15 aSecureTenant

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Posted 20 February 2012 - 02:11 PM

JSA + hb + ctb exceeds NI and 20% tax threshold.

So after JSA reduced @ rate of 100%, you face 85% (hb rate of 65% + ctb rate of 20%).

Hit NI and tax threshold. 65(hb) +20(ctb) +12(NI) +20(BR tax) +13.8 (employer NI) = 130.8%

And I wouldn't call £150 a week adequate when your rent is practically half that amount.

I need roughly 32 hours work/week to break free of benefits. After that the EMTR reduces to NI (12%) + tax (20%) + employer NI (13.8%) - 45.8%, until I hit SLC threshold and then you can add another 9% on.

This doesn't include work clothing or bus fares. (I also neglected the £5 income disregard - you can earn a fiver a week without being taxed upon it, consider it a 48 minute band of 0% tax at the start)


I'm well aware you are not old enough to qualify but on an income of £186.25 (net) per week would qualify for £90.72 Working Tax Credit (working 35 hours per week).

Edited by "Steed", 20 February 2012 - 02:11 PM.

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