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When you hit the 40% tax are you being ripped off?

I would like to earn enough to avoid the 40% tax even if its by a penny as it seems really unreasonable to me that if you earn 100k almost half goes to the government its like working for free half your time so it makes no sense aiming for the big money unless you are making hundreds of thousands per year.


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Reply 1
Avatar for estel
estel
18
Meh, it's the price you pay for living in a society. I don't see why it makes no sense aiming for "big money"?
If you earn £100k, about 35% of that will go to tax, not 50%. The 40% (and 45% at the additional rate) are both marginal.
Original post by Compton Menace
I would like to earn enough to avoid the 40% tax even if its by a penny as it seems really unreasonable to me that if you earn 100k almost half goes to the government its like working for free half your time so it makes no sense aiming for the big money unless you are making hundreds of thousands per year.


Posted from TSR Mobile


You only pay 40% on monies over the threshold. Subsequent governments over the last 15 years have lowered the basic rate of tax and raised the personal allowance so you pay significantly less tax now than you did if you are a middle income earner. If you are earning enough to pay higher rate of tax, good on you. It just means that pay rises are not quite as exciting as they once were.
Unless you are earning the hundreds of thousands of pounds, it is rather unlikely that you'd feel any impact of the 40p tax rate.
Reply 4
Avatar for Treeroy
Treeroy
18
Original post by Compton Menace
I would like to earn enough to avoid the 40% tax even if its by a penny as it seems really unreasonable to me that if you earn 100k almost half goes to the government its like working for free half your time so it makes no sense aiming for the big money unless you are making hundreds of thousands per year.


Posted from TSR Mobile

If you earned £100,000 then you would be taxed £29,200. Not really "half your money", even if it was so what? You are LOADED either way.
Yes.
Original post by Compton Menace
I would like to earn enough to avoid the 40% tax even if its by a penny as it seems really unreasonable to me that if you earn 100k almost half goes to the government its like working for free half your time so it makes no sense aiming for the big money unless you are making hundreds of thousands per year.


Posted from TSR Mobile


It isn't like working for free half your time, because the increased tax rate is only on the money above the threshold.

So you don't pay it on the whole amount you earn, you only pay it on the earnings above £43,001.

If you earned £50,000 a year, your effective tax rate is therefore £9,200 or about 18%. So it's like working for free a bit less than 1 day in 5.

Basically it would be nuts to turn down a higher salary because of the higher tax rate.
Reply 7
Avatar for Reue
Reue
20
Original post by Compton Menace
I would like to earn enough to avoid the 40% tax even if its by a penny as it seems really unreasonable to me that if you earn 100k almost half goes to the government its like working for free half your time so it makes no sense aiming for the big money unless you are making hundreds of thousands per year.


Most people near the 40% threshold will increase pension deductions to drop them back below the 40% line.
40% tax rate is non existent tbh. You get taxed in intervals so you do get a higher amount than 60k. But what you are saying is true. Although getting taxed almost half of your total income is unfair but you have to understand that you get free healthcare,free education and free ****. We also live in a society where you can go outside without feeling endangered. This is where your tax money goes. Also the tax payers also pay for the people who are on job seekers allowance (Benefits).
Original post by Reue
Most people near the 40% threshold will increase pension deductions to drop them back below the 40% line.


you make more money if you hit the 40% threshold... so this is not true
If and when you hit the 40% tax bracket, the chances are you're doing most of the ripping off yourself.
Reply 11
Avatar for Reue
Reue
20
Original post by zainyyyyy
you make more money if you hit the 40% threshold... so this is not true


I don't think you've understood what I was saying.

The 40% threshold is £43k.

People who earn above £43k will usually make extra pension contributions to bring their taxable salary below £43k.
Reply 12
Avatar for Doones
Doones
21
Original post by Treeroy
If you earned £100,000 then you would be taxed £29,200. Not really "half your money", even if it was so what? You are LOADED either way.


Plus £5,332 National Insurance, so total deductions are £34,533.

Total take home from £100k is £65,467.
Original post by Reue
I don't think you've understood what I was saying.

The 40% threshold is £43k.

People who earn above £43k will usually make extra pension contributions to bring their taxable salary below £43k.



why would they do that?
Reply 14
Avatar for Reue
Reue
20
Original post by zainyyyyy
why would they do that?


So that they're not paying 40% tax on a proportion of their earnings.
Reply 15
Avatar for Reue
Reue
20
Original post by Withengar
If and when you hit the 40% tax bracket, the chances are you're doing most of the ripping off yourself.


40% bracket starts at £43k. Hardly a huge sum in London and the home counties.. Not all upper rate tax payers are millionaires.
Original post by Reue
So that they're not paying 40% tax on a proportion of their earnings.


they only pay 40% on the amount above the threshold
Reply 17
Avatar for Reue
Reue
20
Original post by zainyyyyy
they only pay 40% on the amount above the threshold


Original post by Reue
So that they're not paying 40% tax on a proportion of their earnings.


Highlighted for emphasis.
Original post by Reue
40% bracket starts at £43k. Hardly a huge sum in London and the home counties.. Not all upper rate tax payers are millionaires.


I think that satire was quite strongly implied.
Original post by Reue
Highlighted for emphasis.


honestly if you believe people move money to their pension just to avoid paying x amount then maybe you should go back to school

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