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What is the emergency tax rate in the uk?

Confused on UK Income Tax 40% rate?

  • I'm self-employed and I have been looking at the tax rate information on the HM Revenue & Customs website. It says that there is an income tax of 40% for those who earn more than £37,400. Now my calcuations work out that I would earn less after tax if I am not earning £50,000 or over on the 40% tax band. £37,000 - 20% Tax = Just under £30,000 net £40,000 - 40% Tax = £24,000 net £50,000 - 40% Tax = £30,000 net Am I calculating this the wrong way?

  • Answer:

    You don't pay 40% until earnings exceed £43,875. That is personal tax-free allowance of £6,475, and £37,400 at 20%. On £50,000, you would pay tax on £43,525. That's 20% on £37,400 (£7480) and 40% on £6,125 (£2450) total tax £9930.

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dont forget that you also pay National Insurance as well at 8% on income between 5715 and 43875, and 1% on income above that - NI is simply more tax. So on your taxable profits you pay tax at the following rates for this tax year (2010/11), assuming no other income: 0-5715 = tax free 5716 - 6475 = 8% 6476 - 43875 = 28% 43876 - 100000 = 41% 100001- 112950 = 61% (YES, that is right) 112951-150000 = 41% 150001 + = 51% You dont pay tax at the rate on all your income - just on the income in those bands. Under the current regime, because of the admin and accountancy fees and so on, if your profits are above 20,000 to 25,000 you ought to be looking at converting to a limited company.

certaxrugby

You are calculating the wrong way. Firstly you will have a tax free allowance (standard is 6475) on which you pay no tax at all. The next 37,000 is added on top of that and you pay 20% on that amount, only then does the 40% kick in and this higher amount is only charged on the amount above the threshold - not the whole lot. 0 - 6475 = No Tax 6476 - 37,400 = 20% tax 37401 + = 40% tax

Jabberwocky

http://listentotaxman.com/ Try this link, it will give you an idea of how much you will pay. If you earn £50,000, you will only pay 40% tax on around £12,600 of your income (depending on your allowances). The rest will be taxed at lower rates.

never_say_never

The tax system is progressive - you only pay 40% tax on your taxable income over £37,400, not on all of it.

fengirl2

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