Taxable Pay

[Jynxx]

Hi.

Just curious about something a colleague of mine mentioned that the taxable pay was going to be change this year meaning we should get taxed slightly less, I've had a look through some webpages and found this.

http://www.thechamberlaingroup.com/?p=558" onclick="window.open(this.href);return false;

Personal Income Tax

• Personal allowance is to rise by £630 to £8,105 (as previously announced).

Does that mean we're going to get taxed slightly less this from this April (new tax codes etc)?

Thanks :)

[hans solo]

ask mr whyte of glasgow rangers
go on the killie

[TrueBlueTerrier]

Yes -

Anything over your personal allowance is taxed so if the personal allowance goes up, you pay the same percentage rate, but on a different amount.

However, as £650 is 3.5% of £18k anyone earning more than that will effectively be paying the same amount of tax.

[wandle]

Yes -

Anything over your personal allowance is taxed so if the personal allowance goes up, you pay the same percentage rate, but on a different amount.

However, as £650 is 3.5% of £18k anyone earning more than that will effectively be paying the same amount of tax.

Not sure what you mean, Teebs ?

Surely, if £630 of income that was taxed in 2011/12 is now part of the Personal Allowance in 2012/13, then that's £630 that you won't pay 20% Income Tax on.
So you're better off by £126 per annum, which equates to a staggering £2.42/week extra, even if your pre-tax wage remains the same.

[TrueBlueTerrier]

Yes -

Anything over your personal allowance is taxed so if the personal allowance goes up, you pay the same percentage rate, but on a different amount.

However, as £650 is 3.5% of £18k anyone earning more than that will effectively be paying the same amount of tax.

Not sure what you mean, Teebs ?

Surely, if £630 of income that was taxed in 2011/12 is now part of the Personal Allowance in 2012/13, then that's £630 that you won't pay 20% Income Tax on.
So you're better off by £126 per annum, which equates to a staggering £2.42/week extra, even if your pre-tax wage remains the same.

Your right - if we didn't get the 3.5% pay rise this year due 1 Apr 2012 then we would be paying less tax and getting a small rise.

However, if you earn £18,000 now a 3.5% rise means an increase of £650 - therefore as your personal allowance has increased by the same amount, the amount of tax you pay will remain the same.

So if you earn more than £18K annually you'll be paying more tax than now, if less than £18k you'll be paying less, after the 3.5% pay rise

I think I have it right, but I may have confused myself now.

[arnold cheshire]

the tax allowance change should make you 2pound 40 p a week better off then we have the pay rise of about 12 quid minus deductions for full timers so we should be ten pound better off a week for full timers

[RobertT]

By my calculations the increase in the tax allowance will mean we will pay £126 per year / £2.42 per week less tax.
Assuming we get the pay rise our basic annual pay will increase by £654 per year / £12.58 per week.
That pay increase will mean paying an extra £130.52 per year / £2.51 per week in tax.
Pension contributions will presumably go up by 3.5%, or about £0.65.
National Insurance will go up a little aswell - not sure how much!!!
Therefore basic take home pay should increase by around £11 - £11.50 per week.

Figures are based on current full time basic pay of £359.52 per week.

[wandle]

However, if you earn £18,000 now a 3.5% rise means an increase of £650 - therefore as your personal allowance has increased by the same amount, the amount of tax you pay will remain the same.

I see what you're saying now (I think).

The extra tax that's deducted as a result of the pay rise is almost completely offset by the rise in Personal Allowances ?

So, yes, the weekly tax paid (deducted) will be almost the same as now, but with a take-home wage that's a full 3.5% better

Without the rise in Personal Allowances, I calculate that we'd normally need a 4.375% rise in gross wages to be 3.5% better-off after tax