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


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#16 Self Employed Youth

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Posted 20 February 2012 - 02:27 PM

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).


Roll on July, I'm going to see my JC+ advisor about NEA today, so hopefully should be back working soon, and hopefully break free of benefits, or at least be better off than dole for the last 6 months of being 24. I might be working in your neck of the woods soon too, some work going in a quarry picking sandstone Posted Image
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!

#17 aSecureTenant

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Posted 20 February 2012 - 02:47 PM

Roll on July, I'm going to see my JC+ advisor about NEA today, so hopefully should be back working soon, and hopefully break free of benefits, or at least be better off than dole for the last 6 months of being 24. I might be working in your neck of the woods soon too, some work going in a quarry picking sandstone Posted Image


hehe I was in your neck of the woods yesterday. I crept over the border into the socialist republic of South Yorkshire, to Dunford Bridge, via Hade Edge silently by bike, to avoid suspicion. My mate lives at Stocksbridge. Not many border guards in them parts. Posted Image

"Capitalism has defeated communism. It is now well on its way to defeating democracy" ~ David Korten

“To think output and income can be raised by increasing the quantity of money, is like trying to get fat by buying a larger belt” ~ John Maynard Keynes 

 


#18 easy2012

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Posted 20 February 2012 - 04:51 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)


130% tax rate... Sounds like the government now has the real incentive to use every tricks to get people out to work then...

#19 TheBigBean

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Posted 20 February 2012 - 05:07 PM

Income tax basically works out as

<£7,475 0%
£7,475 - £42,475 20%
£42-475 - £100,000 40%
£100,000 - £114,950 60%
£114,950 - £150,000 40%
£150,000 + 50%

The middle 60% bracket is foolish and poorly thought through, but looks like it is here to stay. If you are in this bracket you won't get much sympathy from anyone earning less than you. The solution is to put the amount in excess of £100k in a pension.

On top of this you have to pay NI which is 2% for the 60% bracket, hence why people talk about a marginal rate of taxation of 62%.

#20 aSecureTenant

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Posted 20 February 2012 - 06:51 PM

130% tax rate... Sounds like the government now has the real incentive to use every tricks to get people out to work then...


Not necessarily. The WTC can work out more than JSA.

"Capitalism has defeated communism. It is now well on its way to defeating democracy" ~ David Korten

“To think output and income can be raised by increasing the quantity of money, is like trying to get fat by buying a larger belt” ~ John Maynard Keynes 

 


#21 Mikhail Liebenstein

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Posted 20 February 2012 - 09:45 PM

Income tax basically works out as

<£7,475 0%
£7,475 - £42,475 20%
£42-475 - £100,000 40%
£100,000 - £114,950 60%
£114,950 - £150,000 40%
£150,000 + 50%

The middle 60% bracket is foolish and poorly thought through, but looks like it is here to stay. If you are in this bracket you won't get much sympathy from anyone earning less than you. The solution is to put the amount in excess of £100k in a pension.

On top of this you have to pay NI which is 2% for the 60% bracket, hence why people talk about a marginal rate of taxation of 62%.


Bugger - I'm currently at £126k Gross and £114k taxable , but with 2 months to go - I'm going to have to stick some cash into my second pension, but I am not sure how to get the rest back off the Inland Revenue who had it via PAYE.

#22 Warwick-Watcher

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Posted 20 February 2012 - 10:41 PM

Bugger - I'm currently at £126k Gross and £114k taxable , but with 2 months to go - I'm going to have to stick some cash into my second pension, but I am not sure how to get the rest back off the Inland Revenue who had it via PAYE.



Simply fill out a self assessment tax return and reclaim the extra 20% (pension manager will do the first 20% reclaim and put it in the pot).

#23 Self Employed Youth

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Posted 21 February 2012 - 02:31 AM

Not necessarily. The WTC can work out more than JSA.


Aye, it's also worth noting it's over bands of income...

So on a weekly basis for under 25 single adult in rented accommodation (Assume rent = 65, council tax = 20, U25 JSA rate of £53.45):

£0
----------- 0%
5
-----------100%
58.45'
----------- 85%
102
----------- 97% *(+13.8% if including employers NI = 110.8%)
145
----------- 117% *(130.8%)
158.45'
----------- 32% *(45.8%)
[Full time work = 37.5*6.08 = 228]
816.82
----------- 52% *(65.8%)

To include tax credits for a single male one would be 25+, so the (') bands would be increased slightly 67.50 to take account of normal rate JSA,, tax credits would kick in at 30hours (6.08*30= 182.40) paid at a rate of 1180/year = 22.70/per week, these are then withdrawn @ 41%.

Therefore for 25+ year single person in rented accommodation;


£0
----------- 0%
5
-----------100%
67.500
----------- 85%
102
----------- 97% *(+13.8% if including employers NI = 110.8%)
145
----------- 117% *(130.8%)
167.50
----------- 32% *(45.8%)
182.40 (WTC now paid as benefit at rate of on top of wage 22.70/week)
----------- 73% *(86.8%)

[Full time work = 37.5*6.08 = 228]
237.76 (WTC now withdrawn completely)
-----------32% *(45.8%)
816.82
----------- 52% *(65.8%)
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!

#24 mgk

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Posted 26 February 2012 - 12:16 PM

Income tax basically works out as

<£7,475 0%
£7,475 - £42,475 20%
£42-475 - £100,000 40%
£100,000 - £114,950 60%
£114,950 - £150,000 40%
£150,000 + 50%

The middle 60% bracket is foolish and poorly thought through, but looks like it is here to stay. If you are in this bracket you won't get much sympathy from anyone earning less than you. The solution is to put the amount in excess of £100k in a pension.

On top of this you have to pay NI which is 2% for the 60% bracket, hence why people talk about a marginal rate of taxation of 62%.


Could one of you smart people explain this for me please. say you earn 115.....the ideal is putting 15k into a pension to regain the personal allowance. Now that would mean "reducing income for tax purposes" - now this is the bit I dont understand - is it as simple as putting a 15k contribution into any old personal pension or does it need to be a special type of pension eg asalary sacrifice arrangement.

Thanks

#25 Mikhail Liebenstein

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Posted 26 February 2012 - 12:24 PM

Could one of you smart people explain this for me please. say you earn 115.....the ideal is putting 15k into a pension to regain the personal allowance. Now that would mean "reducing income for tax purposes" - now this is the bit I dont understand - is it as simple as putting a 15k contribution into any old personal pension or does it need to be a special type of pension eg asalary sacrifice arrangement.

Thanks


It is easier if you can use a scheme sheltered from PAYEE which will typically be your work pension using salary sacrafice.

My new Tax adviser (i didn't have one before) says it not what you pay into your pension that determines the tax relief, but your highest rate of tax and then work in reverse as you use the allowance - which I kind of knew.

The question I still haven't fathomed is I can pay in a lump sum, but the so and soes at the HMRC still have a huge chunk of my gross income. The relief I'll get will most be at 40%, with half of that claimed back by the provider. I still haven't worked out what to do to get the 60% bit back, basically the challenge is I may be a lot closer to £150k than I'd thought, so I might have to stick a huge sum in to even get use of the 60% releif.

#26 mgk

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Posted 26 February 2012 - 01:28 PM

Thanks - I think that is the bit I am struggling with :
I have a personal pension with my employer so I get 20% relief at source (is this "salary sacrifice" - i thought salary sacrifice is something specific.
I get the additioanl 20% relief through my coding notice or tax return.
So if I wanted to top my pension up this year by say 10k to "get back" the personal allowance I dont get how that happens as you say - just a one off payment direct to the personal pension out of my taxed income or does it need doing in some special way.

It is easier if you can use a scheme sheltered from PAYEE which will typically be your work pension using salary sacrafice.

My new Tax adviser (i didn't have one before) says it not what you pay into your pension that determines the tax relief, but your highest rate of tax and then work in reverse as you use the allowance - which I kind of knew.

The question I still haven't fathomed is I can pay in a lump sum, but the so and soes at the HMRC still have a huge chunk of my gross income. The relief I'll get will most be at 40%, with half of that claimed back by the provider. I still haven't worked out what to do to get the 60% bit back, basically the challenge is I may be a lot closer to £150k than I'd thought, so I might have to stick a huge sum in to even get use of the 60% releif.



#27 Mikhail Liebenstein

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Posted 26 February 2012 - 03:18 PM

Thanks - I think that is the bit I am struggling with :
I have a personal pension with my employer so I get 20% relief at source (is this "salary sacrifice" - i thought salary sacrifice is something specific.
I get the additioanl 20% relief through my coding notice or tax return.
So if I wanted to top my pension up this year by say 10k to "get back" the personal allowance I dont get how that happens as you say - just a one off payment direct to the personal pension out of my taxed income or does it need doing in some special way.




I did ask my adviser and he suggested they'd use a coding notice change for small sums or write a cheque for larger amounts. No idea what the threshold is though, I believe you may be able to request an immediate refund or an adjustment when doing your tax return..

#28 silver surfer

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Posted 26 February 2012 - 04:40 PM

I'll be just inside the £100-114k income range after I retire at the end of this year. My company asked if I want to take on some consultancy work, I thought about it but for every £1000 they'd pay me I'd actually only get £380, so I think I'd rather potter in the garden and sail my boat. Also I've no option to put it into a pension as I'm already up against the lifetime limit.

I explained the situation to my company and said thanks but no thanks. So they've handed the project to a recently retired colleague in the US.

#29 porca misèria

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Posted 26 February 2012 - 05:18 PM

It is easier if you can use a scheme sheltered from PAYEE which will typically be your work pension using salary sacrafice.

My new Tax adviser (i didn't have one before) says it not what you pay into your pension that determines the tax relief, but your highest rate of tax and then work in reverse as you use the allowance - which I kind of knew.

The question I still haven't fathomed is I can pay in a lump sum, but the so and soes at the HMRC still have a huge chunk of my gross income. The relief I'll get will most be at 40%, with half of that claimed back by the provider. I still haven't worked out what to do to get the 60% bit back, basically the challenge is I may be a lot closer to £150k than I'd thought, so I might have to stick a huge sum in to even get use of the 60% releif.

I put in £50k in each of the three years of my life I've had that much money in the first place. Equivalent to £30k from taxed income.

i.e. 40k contributions, 10k taxback in the scheme making 50k, and another 10k rebate when I complete the tax form.

#30 porca misèria

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Posted 26 February 2012 - 05:22 PM

I'll be just inside the £100-114k income range after I retire at the end of this year. My company asked if I want to take on some consultancy work, I thought about it but for every £1000 they'd pay me I'd actually only get £380, so I think I'd rather potter in the garden and sail my boat. Also I've no option to put it into a pension as I'm already up against the lifetime limit.

I explained the situation to my company and said thanks but no thanks. So they've handed the project to a recently retired colleague in the US.

I don't think you'll get too much sympathy as hard-done-by :D Especially since your 62% marginal rate is so much lower than for a person of working age.

But that's a nice little illustration of why excess taxes are bad for the economy. Slash your marginal rate in half and ... 31% of something is more than 62% of nothing.




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