Income Tax bands

[ERICSMUM]

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

[disney332]

Originally Posted by ERICSMUM

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

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Spot on EM.

Disney332

[cornishfrogboy]

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.

[ERICSMUM]

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.

[mitch84]

Originally Posted by disney332

Spot on EM.

Disney332

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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

[mitch84]

Originally Posted by ERICSMUM

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.

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It was £40000 but got raised to £50000

[ERICSMUM]

Originally Posted by mitch84

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

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So the £12,500 (0%) and £37,500 (20%) are added together (=£50,000) and any earnings above £50,000 at 40% ?

[disney332]

Originally Posted by mitch84

It was £40000 but got raised to £50000

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Oops sorry EM and all more up to date peeps

On the naughty step

Disney332

[Princess Alison]

Originally Posted by cornishfrogboy

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.

See more...

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

[disney332]

Originally Posted by ERICSMUM

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

See more...

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

Disney332