Reply With QuoteYour Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.
https://www.gov.uk/income-tax-rates/income-over-100000
Employee 'Personal allowance' - less than £12,750 if earnings > £100k p.a.?
Just curious if the personal (tax-free) allowance is automatically lower than the usual £12,750 p.a. for high earners?
Thanks guys. :)
Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.
https://www.gov.uk/income-tax-rates/income-over-100000
Note, it may not be automatic...and you will have to also complete a self-assessment return.
The effective 60% tax band…
Thanks guys! I hadn't appreciated this 'stealth' tax was in force.
Government taking the piss - but I suppose anyone earning over £100k isn't going to get much sympathy from the general public. :)
You would have hoped the government would reward / encourage one for earning more and as a result paying more tax rather than taking more as an overall percentage.
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My tax code for the coming year was a nice negative number based on the HMRC estimate on my 22/23 pre-tax earnings of £680k, which suggested that I needed to start paying tax even before I started earning.
I was quite happy with this however, having checked with my employer, they had no intention to pay me anything like that amount.
That was a bit of a disappointment. I called HMRC who suggested that their employee might have fat fingered it or a cat walked over the keyboard or something and they reduced the estimate by about 95% returning my tax code to 1275 as I'd expected it to be.
I'll be honest, if they'd have paid me £680k, I'd have been more than happy to pay the tax on it!
It really is asbsurd.Originally Posted by mtagrant
It has been such for quite a few years.....
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I have this issue every year. April payday is usually fun (following the annual profit share / bonus in March) it usually entails an empty bank account followed by a long frustrating phone call to our payroll who say it’s nothing to do with them and telling me I have to talk to HMRC and then HMRC saying I need to talk to pay roll. My payslips are all over the place until around xmas at which point I do my self assessment and then HMRC say they want more money from me.
To answer the OP yep its a fun stealth tax, if you are in the fortunate position to have this problem you really need to consider it and account for it when looking at earnings as there is a grey area between 100k and 125k where any uplift in salary is really not worth it, (but there are tax efficient ways of reducing this tax take - I pump it in to a pension) over 125k and they take even more money off you 45%.
For clarity this is not a humble brag just a really sore point currently as I know this is going to happen next month.
Last edited by Sinnlover; 9th March 2022 at 09:40.
Your employer is legally required to provide you with a P60 and P11D by early July after the tax year ends.
I then use the online tax calculator to get a view on tax owed/overpaid, and then have 8 months to arrange the funds to cover the tax owed.
Never understood the logic behind it. There must be some though.
It’s no great problem though, because as someone has already said, pay anything between £100k and £125k in to a pension.
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To clarify, I appreciate this only works if you earn between £100k and £125k and is not as effective for people earning more than £125k.
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But you will still reduce your tax liability on the amount pumped in to the pension if under the allowance.
Tax policy? Not sure many things they do stand much scrutiny. Tax take from measures like this are presumably reduced by the time and effort implementing them.
Correct and also the amount you can pay into a pension and get tax benefits also tapers down the more you earn so it could be as low as £4k per annum if you earn more than £312k (First World problems I know).
62% when you include NI.
Soon to go to higher when the NI increase kicks in.
Two for you and one for me - not as bad as the Beatles Taxman.
Yes this one's a classic, here is your reward for working hard and contributing more revenue to society than most, Yes we take away your tax free allowance.
I think you’re missing the bit where the answer to every monetary challenge is to tax the higher earners more.
The super wealthy don’t pay tax
The wealthy can pay advisors to minimise tax
The prudent get taxed till they squeak
What’s the current ratio of how much tax is raised from the top one percent of tax payers?
I had dinner with a non-Dom last week who is a little bewildered why people pay tax- societal good didn’t work.
Last edited by joe narvey; 9th March 2022 at 17:20.
This has been in place for 10 years. In those 10 years compounded inflation is 30%.
So, the fiscal drag is massive. Anyone earning £70k 10 years ago, is now dragged into this punitive tax today just by inflation increased pay rises.
If you think this is bad, wait til you see what happens to your pensions allowance once you tip the £240k level
And then exceed the threshold and start on the 55% bandIf you think this is bad, wait til you see what happens to your pensions allowance once you tip the £240k level
Oh boy, life sucks!
And the staff want a london living wage. Grabbing bastards
It is a nasty trap, particularly if you earn £100k and get a £10k bonus which ends up being more like £3800!
I suspect there are a lot of TZers that would be happy to suffer that indignity
Straight to pension is the only way.
Correct. Defer into pension and claim the relief.
The incentive to pay into pension diminishes once you’re in the 45% tax bracket though as they taper down the tax free pension allowance ultimately to £10k.
At the point it is worth considering unit trusts which utilise the much forgotten CGT annual allowance.
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Does the pension allowance include employer contributions btw?
Can't pay more into pension as I'm hitting the Annual Allowance limit just on inflationary "pot" growth. (And LTA probably soon too)If you think this is bad, wait til you see what happens to your pensions allowance once you tip the £240k level
Can't take salary sacrifice, as any exit from this will trigger the same.
Can't set up LLP as NHS won't agree to this sort of pay arrangement.
So I work 2 overtime shifts and essentially only get paid for one of them.
£8300 Annual Allowance tax bill due in Jan 2023 for my pension "pot" growth, which I have no control over. On top of Income Tax.
I have a tax free allowance of zero. No child benefit, no relief or anything.
I know I shouldn't moan, but this sort of punishment for this income bracket seems very unfair.
But thank Dog we don't have Labour in power.
Yes, and would be classed as employer contribution if you can do it as salary sacrifice (NI benefit), but still limited to £40k/year (bearing in mind carried forward allowances from previous years)
I'm not sure this is true. The 45% band kicks in at £150k, pension allowance tapering becomes relevant at £200k.
Isnt annual limit on contributions only - so you can put £40k in regardless of how it performs, no?
No - it's £40k if paying into a DC (defined contribution) 'pot'
If you have a DB (defined benefit) pension it's based upon deemed growth in an imaginary 'pot' which doesn't exist. (or at least not in the NHS etc) It's fiendishly complicated, and very often misunderstood by financial advisers/HMRC etc.
In essence, it's logical to have a cap (annual allowance) on contributions in a DC scheme, and on the 'pot' in a defined benefit scheme, but not both!
Best wishes,
Martyn.
You are correct, pension allowance tapers from £200k to £240k leaving a £10k allowance thereafter.
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Or get unfairly dismissed , then get severence of 6 months just before the end of the tax year plus the former employer settling out of court as they’ve been advised their liklihood of losing the tribunal and death and rape threats from their senior management coming to light.
Yes thank you for the £12k ganking at the end of that lot HMRC .
I'm not sure what alternative system high earners would prefer, lower earners to pay more? Seriously, if you pay higher rate tax then think yourself lucky and bask in the knowledge you're making a bigger social contribution because you can afford it.
The pension relief for HR taxpayers is pretty generous, all things considered. Plenty will receive HR tax relief now but pay limited HR or basic rate when they withdraw it. I know some lower earners who would love a pension boost like that paid for by everybody else!
Indeed, but not according to one previous poster, apparently high earners are "working hard and contributing more revenue to society than most" so shouldn't have to pay extra. The 'most' who seemingly don't work as hard would love to have this problem in their lives.
Last edited by Ruggertech; 11th March 2022 at 09:58.
I’m not really in any of the brackets above but regardless of what you earn a 62% tax rate is absolute balls.
My own grievance is pension contributions are done on base salary only and last year 60% of my income was through commission. This year it’ll be about 40%. It’s a lot of pension to miss out and the tax at times can be truly horrifying but what can you do when you’re just a PAYE lemming?
Surely you can pay any amount of money up to the limits (40k I think) into any pension you want, as long as your pot isn't over£1,073,100 you wont pay tax on the way in.
Last edited by adrianw; 11th March 2022 at 11:52.
You won’t pay tax on the way in even if your pot is over the LTA. And as mentioned above the £40k does taper down to £10k on earnings over £240k
In the last job I was doing 12% but my current job is salary sacrifice/exchange and the max they’ll let me put in is 10%. My pension pot is minuscule as for a few years I opted out and put everything into a deposit for the house so only started giving around 29/30.
I have made one-off transfers into my Vanguard but that only gets a 20% top up, think I’d have to self assess for the difference so never bothered. I’d probably get it wrong and get fined.
It’s easy to claim the tax relief and you would be daft not to do it.
Not the only way. By a £3k bike on the cycle to work scheme, electric car on salary sacrifice, charity donation etc.
Effectively do anything that comes off your top line, including pension.
True, but I don’t require a car or bike!
My point was that I think you could nominate to put it in any pension, not just your company scheme
Just found out that you only need pay in the net pension figure.
E.g. if on £125k, pay £20k to pension and the £5k top-up counts towards reducing your income to £100k.
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Which top up is this ?
The tax relief that gets added automatically to your pension contribs.
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You are right in that in that people should practice more gratitude in general as it will lead to a happier mindset.
People who earn a flat £120k salary (or whatever the exact number is for 0 personal allowance) probably feel like slightly less affected by this as they’ll get used to their monthly net wage. It’s when a bonus/commission etc. pushes them into this territory where it can feel particularly punitive.
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You are right in that in that people should practice more gratitude in general as it will lead to a happier mindset.
People who earn a flat £120k salary (or whatever the exact number is for 0 personal allowance) probably feel like slightly less affected by this as they’ll get used to their monthly net wage. It’s when a bonus/commission etc. pushes them into this territory where it can feel particularly punitive.
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