Income tax allowance on earnings over £100k.
Discussion
Morning all,
A quick (hopefully!) question...
I understand the idea that for every £2 earnt over £100k you lose £1 of your personal allowance, but looking on the HMRC website, it specifically says "If your income is large enough, your Personal Allowance will be reduced to nil."
The question is, what exactly does "nil" mean?
If I were to earn £118,880 with nothing else affecting my personal allowance, then my personal allowance would be reduced to nil, and that's easy enough to understand.
If, however, I had a company car, private healthcare and various other BIK items which had already reduced by personal allowance to, £3k (for sake of argument), does this mean my personal allowance would be reduced to -£6,440, or would it - as the HMRC website seems to suggest - stop at £0?
A quick (hopefully!) question...
I understand the idea that for every £2 earnt over £100k you lose £1 of your personal allowance, but looking on the HMRC website, it specifically says "If your income is large enough, your Personal Allowance will be reduced to nil."
The question is, what exactly does "nil" mean?
If I were to earn £118,880 with nothing else affecting my personal allowance, then my personal allowance would be reduced to nil, and that's easy enough to understand.
If, however, I had a company car, private healthcare and various other BIK items which had already reduced by personal allowance to, £3k (for sake of argument), does this mean my personal allowance would be reduced to -£6,440, or would it - as the HMRC website seems to suggest - stop at £0?
salary calculator here
usually a K code is negative e.g. you get tax code of K750 means you pay tax on an extra 7500 a year and have no allowance
http://www.thesalarycalculator.co.uk/salary.php
usually a K code is negative e.g. you get tax code of K750 means you pay tax on an extra 7500 a year and have no allowance
http://www.thesalarycalculator.co.uk/salary.php
Kermit power said:
That I knew. It was the statement on the HMRC website about "reducing to nil" which confused me, as it seems the reality is that they will reduce beyond nil.
It's not that your personal allowance reduces below nil - it can't go below nil. However, your personal allowance is just one of the items which goes into determining your tax code. So, in your case, your tax code would be "negative" reflecting nil personal allowance and the value of certain benefits in kind.To an extent, this has always been the way even before the personal allowance was removed for high earners. Company cars were a typical way of ending with a K-code (i.e. a negative tax code).
Yeah things get phucked up pretty fast once you hit £100k
Pensions are good as are VCT's but eventually you cant run any more and gang rape occurs as per above.
You can also defer earnings and take advantage of AIA for a work "truck" etc
I dont see why marginal rates should be 64% here while in say NZ the top rate is basically half of that in the mid 30% range with no NI or any other crap. Its communism pure and simple.
Pensions are good as are VCT's but eventually you cant run any more and gang rape occurs as per above.
You can also defer earnings and take advantage of AIA for a work "truck" etc
I dont see why marginal rates should be 64% here while in say NZ the top rate is basically half of that in the mid 30% range with no NI or any other crap. Its communism pure and simple.
Afternoon all,
Just resurrecting this to try and understand it again before I get on to do my tax return and the like!
Let's assume, to keep the maths simple, that my income was exactly £100k plus a car allowance of £6k per annum.
As I understand it, the extra £6k is seen as bog standard income by HMRC, so I'd lose £3k of my personal allowance for being £6k over the £100k barrier?
Obviously my personal allowance will be reduced by the BIK on the company car, but am I right in assuming that I'd be getting £3k of personal allowance back because I'd not then be earning over the £100k threshold?
Or does the BIK element also somehow get factored in to the threshold calculation?
Just resurrecting this to try and understand it again before I get on to do my tax return and the like!
Let's assume, to keep the maths simple, that my income was exactly £100k plus a car allowance of £6k per annum.
As I understand it, the extra £6k is seen as bog standard income by HMRC, so I'd lose £3k of my personal allowance for being £6k over the £100k barrier?
Obviously my personal allowance will be reduced by the BIK on the company car, but am I right in assuming that I'd be getting £3k of personal allowance back because I'd not then be earning over the £100k threshold?
Or does the BIK element also somehow get factored in to the threshold calculation?
One thing to note IIRC is that upping your pension contributions is not always possible if you are only receiving dividends as they are not classed as 'earned income'.
Salary, bonuses and BIKs are earned income and so can be used to calculate allowable pension contributions.
Apologies in advance if the rules have changed
Salary, bonuses and BIKs are earned income and so can be used to calculate allowable pension contributions.
Apologies in advance if the rules have changed
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