What figure does the higher tax band start at?
Discussion
For the last two days Jeremy Vine has been banging on about the loss of child benefit for higher rate tax payers, constantly stating the figure at £44,000.
On the HMRC web site it states that for 2010/11 the amount is £37,400.
On DirectGov.co.uk it states:
[i]Higher rate of Income Tax to be frozen in 2012-13
The government has announced that the point at which individuals start to pay the higher rate of Income Tax (known as the higher rate threshold) will be frozen in 2012-13 at 2011-12 levels.[/i]
But no where does it state what the tax threshold will be in 2011-12!!
Meanwhile The Telegraph believe that it's actually dropping to £34,900! Or is it £42,375?
[i]The level at which the higher rate of tax starts to apply has been lowered by £1,500 and will now be levied on any income above £42,375, as opposed to £43,875 previously.
Taking into account the £1,000 rise in the personal tax-free allowance, the basic-rate tax band has shrunk by a total of £2,500. This means that £34,900 of a person’s income is now taxed at 20 per cent, as opposed to £37,400 previously. This means the estimated three million existing higher rate taxpayers will also be worse off as a result of the changes, which will take effect from the start of the 2011-2012 tax year.[/i]
So at what level does your salary actually start to incur the higher level of tax?
On the HMRC web site it states that for 2010/11 the amount is £37,400.
On DirectGov.co.uk it states:
[i]Higher rate of Income Tax to be frozen in 2012-13
The government has announced that the point at which individuals start to pay the higher rate of Income Tax (known as the higher rate threshold) will be frozen in 2012-13 at 2011-12 levels.[/i]
But no where does it state what the tax threshold will be in 2011-12!!
Meanwhile The Telegraph believe that it's actually dropping to £34,900! Or is it £42,375?
[i]The level at which the higher rate of tax starts to apply has been lowered by £1,500 and will now be levied on any income above £42,375, as opposed to £43,875 previously.
Taking into account the £1,000 rise in the personal tax-free allowance, the basic-rate tax band has shrunk by a total of £2,500. This means that £34,900 of a person’s income is now taxed at 20 per cent, as opposed to £37,400 previously. This means the estimated three million existing higher rate taxpayers will also be worse off as a result of the changes, which will take effect from the start of the 2011-2012 tax year.[/i]
So at what level does your salary actually start to incur the higher level of tax?
Ari said:
For the last two days Jeremy Vine has been banging on about the loss of child benefit for higher rate tax payers, constantly stating the figure at £44,000.
On the HMRC web site it states that for 2010/11 the amount is £37,400.
The £37,400 is the amount above which you pay higher rate tax, but it starts counting from your personal allowance, not from the first pound you earn.On the HMRC web site it states that for 2010/11 the amount is £37,400.
Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
Ari said:
Ok, so why's Jeremy Vine stating categorically that people who earn over £44,000will be affected?
And why are the Telegraph reporting a shift the other way (ie down)?
Because the proposals were in the budget speech, and the media can speculate all it likes about them.And why are the Telegraph reporting a shift the other way (ie down)?
The HMRC website, on the other hand, will not publish concrete facts until they are made concrete ie. after the Finance Bill has been passed.
Kermit power said:
Ari said:
For the last two days Jeremy Vine has been banging on about the loss of child benefit for higher rate tax payers, constantly stating the figure at £44,000.
On the HMRC web site it states that for 2010/11 the amount is £37,400.
The £37,400 is the amount above which you pay higher rate tax, but it starts counting from your personal allowance, not from the first pound you earn.On the HMRC web site it states that for 2010/11 the amount is £37,400.
Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
so roughly £44K! HTH?
Kermit power said:
The £37,400 is the amount above which you pay higher rate tax, but it starts counting from your personal allowance, not from the first pound you earn.
Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
Ahhhh... now that makes more sense, thank you!Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
So basically, earn £43,874 and £37,400 of that will be taxed at 20% (the rest at zero), earn another £10 and that additional £10 will be taxed at 40%?
Ari said:
Kermit power said:
The £37,400 is the amount above which you pay higher rate tax, but it starts counting from your personal allowance, not from the first pound you earn.
Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
Ahhhh... now that makes more sense, thank you!Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
So basically, earn £43,874 and £37,400 of that will be taxed at 20% (the rest at zero), earn another £10 and that additional £10 will be taxed at 40%?
Ari said:
Kermit power said:
The £37,400 is the amount above which you pay higher rate tax, but it starts counting from your personal allowance, not from the first pound you earn.
Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
Ahhhh... now that makes more sense, thank you!Assuming you get a full personal allowance of £6,475, you add that on to the £37,400 and start paying higher rate tax from £43,875.
So basically, earn £43,874 and £37,400 of that will be taxed at 20% (the rest at zero), earn another £10 and that additional £10 will be taxed at 40%?
Thanks to G Brown / A Darling and not reversed by current gov't: Effectively ~61% between about £100 & £113k, then back to ~41% 'till £150k when it's ~51% (haven't looked at the precise figures, one has to include loss of ceiling and increased rates of NI. Not surprisingly, there are a lot more people in the >£100k <£150k bracket than above £150k, so this group is being squeezed hard, especially as there are too few to swing marginals and there is little sympathy from those above or below that rate. Upcoming of course is the loss of Child Benefit as well, which for a family with two children is worth the equivalent of ~£3k before tax if one is in the 100-113 bracket...
The burden of paying for all those people who over-mortgaged, gambled on BTL and blew on credit (which is where those toxic assets came from) is certainly not just falling on the poor.
The burden of paying for all those people who over-mortgaged, gambled on BTL and blew on credit (which is where those toxic assets came from) is certainly not just falling on the poor.
Osborne has made the higher rate tax calculations even more complex. The bands work like this -
1st £6,475 - Nil Tax
Next £37,400 - 20% Tax
£37,400 to £100,000 - 40% Tax
£100,000 to £150,000 - 40% Tax but your personal tax allowance of £6,475 starts reducing by £1 for every £2 over £100,000. Bu the time your income reaches £112,950. all your personal tax allowances have been removed.
Over £150,000 - 50%
1st £6,475 - Nil Tax
Next £37,400 - 20% Tax
£37,400 to £100,000 - 40% Tax
£100,000 to £150,000 - 40% Tax but your personal tax allowance of £6,475 starts reducing by £1 for every £2 over £100,000. Bu the time your income reaches £112,950. all your personal tax allowances have been removed.
Over £150,000 - 50%
smartie said:
Isn't there an intention or promise to like the personal allowance to approx 10K by 2013? Will the 40% band reduce by this £3.5K to make up the difference I wonder?
It was certainly bandied about during the election campaign but my hunch is that it will be allowed to quietly disappear.In two weeks time we will find out for sure how much the country is up to its neck.
smartie said:
Isn't there an intention or promise to like the personal allowance to approx 10K by 2013? Will the 40% band reduce by this £3.5K to make up the difference I wonder?
The personal allowance will go up by £1000 from next April following July's emergency budget - the intention is to reach £10,000 over the life of the parliament - not that expensive a policy as the government would otherwise be taking money away and paying it back in benefits/tax credits anyway.July's budget also froze the income level at which you start to pay the 40% rate until 2013-14 - means more people will be caught by it as earnings rise.
Eric Mc said:
Osborne has made the higher rate tax calculations even more complex....
Osborne or Darling? Surely Labour brought in the 50% band & loss of allowance lower down (60%) & Osborne couldn't afford to reverse it. Interestingly about 40% of people polled recently think the current gov't are responsible for running up the deficit!
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