I have read that people in England who earn £50,001 - £150,000 have to pay 40% income tax. Does that mean that 40% of your salary is taken?

So does that mean that someone who earns a salary of say £55,000 will only pocket £33,000, as £22,000 will have to be paid to the government in income tax?

Is this right?

8 Answers

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  • Clive
    Lv 7
    7 months ago

    No.  Tax is payable in slices of income, or you'd have a sudden increase once you go over the edge of each slice.  So at current rates it goes like this.

    First £12.500 - no tax.

    Next slice up to £50,000 - 20%.  20% x £37,500 = £7,500.

    The last £5,000 x 40% = £2,000.

    Total income tax = £9,500.

    So that's an overall tax rate of 9,500/55,000 = 17.2%.  See?  40% is only on the top slice, so you have to calculate all the slices.  To make it easier, employers are given tax tables so you can just look it up.  And now they are required to make monthly returns online, they'll use software to work it out.

    There is also National Insurance (social security tax).  This is calculated weekly or monthly, not annually, and it differs between the employed and self-employed.  Assuming this person is employed and gets paid the same each month, total NI for the month is £422.09, so £5.065.08 for the year.  (It's less if he were self-employed.)

    Total annual government deductions = £14,565.08.

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  • 8 months ago

    No. You will pay 40% of only the monies you earn beyond the first £55,000. The amount under £55,000 is taxed at a lower rate.

    • Clive
      Lv 7
      7 months agoReport

      No, the 40% tax rate starts at £50,000.

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  • Maxi
    Lv 7
    8 months ago

    No it doesn't mean that https://www.gov.uk/income-tax-rates

    So

    Gross Income    £55,000.00  Tax    £9,500.00  National Insurance    £5,064.16   Take Home Net Salary    £40,435.84

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  • Anonymous
    8 months ago

    https://www.google.com/search?q=uk+tax+brackets&oq...

    Sort of but not quite.  I'm not familiar with the UK tax code but the attached link says no tax is owed on the first Up to £11,850.  From £11,851 to £46,350, tax is calculated at 20%.  From £46,351 to £150,000, tax is calculated at 40%.  For every extra £ you make above £46,351 of taxable income the government take 40%.

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  • 8 months ago

    That's the problem with all these wonderful government programs.  Someone has to pay for them.  There ain't no free lunch.  

    • Clive
      Lv 7
      7 months agoReport

      So you don't know.

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  • 8 months ago

    In England, you pay no income tax on the first £12,500 of your salary, 20% on the next £37,500, 40% on the next £100,000 and 45% on anything over that. Someone with a salary of £55,000 would pay income tax of £7,700.

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  • martin
    Lv 7
    8 months ago

    This is correct unless there are credits and deductions entitling that person to reduce the tax owed.

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  • Greg
    Lv 7
    8 months ago

    Yes. The more benefits the government provides, the more taxes collected. Many countries take more than half of the averages person's wages.

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