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Old 22 Nov 20, 09:35 PM  
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ERICSMUM
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Income Tax bands

I’ve been retired for a while and I’ve lost track. Could do with some clarification please of the HMRC website.

The personal tax-free allowance (for people earning less than £100k) is £12,500.

Then a rate of 20% tax applies upto a max of £37,500. Then, 40% from £37501 (to another max).

Does this mean that on earnings of £50,000 (for example)
- the first £12,500 is tax free
-the chunk from £12,500 to £37,500 (being £25,000) is taxed at 20%
- and the chunk from £37501 to £50,000 (ie £12,499) is taxed at 40% ?

Thanks

Edited at 09:36 PM.
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Old 22 Nov 20, 09:42 PM  
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disney332
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Originally Posted by ERICSMUM View Post
I’ve been retired for a while and I’ve lost track. Could do with some clarification please of the HMRC website.

The personal tax-free allowance (for people earning less than £100k) is £12,500.

Then a rate of 20% tax applies upto a max of £37,500. Then, 40% from £37501 (to another max).

Does this mean that on earnings of £50,000 (for example)
- the first £12,500 is tax free
-the chunk from £12,500 to £37,500 (being £25,000) is taxed at 20%
- and the chunk from £37501 to £50,000 (ie £12,499) is taxed at 40% ?

Thanks
Spot on EM.

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Old 22 Nov 20, 09:47 PM  
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cornishfrogboy
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Nope...

Your personal allowance is £12,500 and on that you pay nothing.

Basic rate tax is paid on earnings between £12,501 and £50,000 at 20% (that is £37,500 of 20% ).

Higher rate tax is paid on earnings of £50,001 to £150,000 at 40%

Additional rate tax is paid on earnings over £150,000 at 45%

Hoping that this clarifies things.
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Edited at 09:53 PM.
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Old 22 Nov 20, 09:48 PM  
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Thanks. I didn’t realise the 40% tax rate kicked in on earnings over £37,500, I’ve always assumed it was over earnings somewhere in the £40,000 bracket.

Edited at 09:49 PM.
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Old 22 Nov 20, 09:49 PM  
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Originally Posted by disney332 View Post
Spot on EM.

Disney332
Not spot on

It’s 20% up to £50,000. So £12,500 at nothing, then £37,499 at 20%.

Someone who earns £50,000 will pay no higher rate tax at all
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Edited at 09:51 PM.
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Old 22 Nov 20, 09:49 PM  
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Originally Posted by ERICSMUM View Post
Thanks. I didn’t realise the 40% tax rate kicked in on earnings over £37,500, I’ve always assumed it was over earnings somewhere in the £40,000 bracket.
It was £40000 but got raised to £50000
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Old 22 Nov 20, 09:52 PM  
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ERICSMUM
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Originally Posted by mitch84 View Post
Not spot on

It’s 20% up to £50000. So £12500 at nothing, then £37,499 at 20%.

Someone who earns £50000 will pay no higher rate tax at all
So the £12,500 (0%) and £37,500 (20%) are added together (=£50,000) and any earnings above £50,000 at 40% ?
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Old 22 Nov 20, 09:53 PM  
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Originally Posted by mitch84 View Post
It was £40000 but got raised to £50000
Oops sorry EM and all more up to date peeps

On the naughty step

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Old 22 Nov 20, 10:00 PM  
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Princess Alison
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Originally Posted by cornishfrogboy View Post
Nope...

Your personal allowance is £12,500 and on that you pay nothing.

Basic rate tax is paid on earnings between £12,501 and £50,000 at 20% (that is £37,500 of 20% ).

Higher rate tax is paid on earnings of £50,001 to £150,000 at 40%

Additional rate tax is paid on earnings over £150,000 at 45%

Hoping that this clarifies things.
Just for info: The Income between 100 and 123k is effectively taxed at 60% because you lose the personal allowance.

Earnings from 124k you're taxed at 40% until next band

Edited at 10:02 PM.
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Old 22 Nov 20, 10:01 PM  
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disney332
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Originally Posted by ERICSMUM View Post
I’ve been retired for a while and I’ve lost track. Could do with some clarification please of the HMRC website.

The personal tax-free allowance (for people earning less than £100k) is £12,500.

Then a rate of 20% tax applies upto a max of £37,500. Then, 40% from £37501 (to another max).

Does this mean that on earnings of £50,000 (for example)
- the first £12,500 is tax free
-the chunk from £12,500 to £37,500 (being £25,000) is taxed at 20%
- and the chunk from £37501 to £50,000 (ie £12,499) is taxed at 40% ?

Thanks
If you earn £50,000 the first 12500 is tax free.

The next 37,500 is taxed at 20%

Forget the 40% it will not apply if earning £50,000

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