RE: TAX BRACKETS IN THE UK

Hi Everyone.

Quick question is there a website or does anyone know how much tax they take out of your monthly salary? Someone mentioned that the tax is 40%.  It maybe right but I thought that seemed high.  I am looking to get an idea what I am going to be making over in the UK before I move so I can budget better.

I use this website to see what the net salary will be: www.listentotaxman.com. It doesn't give you the percentages unfortunately. I've lost the website that gave the breakdown and if I run across it, I'll post it. Hope this helps.

I was shocked to see 36k posted in another thread as the 40% tax bracket so I just looked up the brackets. This is from http://en.wikipedia.org/wiki/Tax_bracket#Tax_brackets_in_the_UK:

Tax brackets in the UK

In the 2005-2006 tax year, the tax brackets were:

    * 10%: from £0 to £2,090
    * 22%: from £2,090 to £32,400
    * 40%: from £32,400 and above

This covers income after the personal allowance (£4,895 for single people, meaning that 40% is not paid until more than £37,295 is earned).

I guess if you're earning around $37k the last thing you want is a small raise, as you'd end up bringing home less! Would would it have to increase to for you to actually bring home more? It's too late on a Friday afternoon to try and calculate that!

Doesn't the tax brackets work the same way so that it's 40% starting at any amount earned above 32,400 and not on the total income? You would never bring home less just because you jumped to the next tax bracket.

If that's true, you would pay 209 for the 10% bracket, 6,668 for the 22% bracket, and then start paying the 40%. That would mean if one earned 37,295, you would pay 6,877 in taxes (effective rate = 18.4%).

Doesn't the tax brackets work the same way so that it's 40% starting at any amount earned above 32,400 and not on the total income? You would never bring home less just because you jumped to the next tax bracket

Yep, just realized that! Like I said, it's a Friday... 

You scared me there for a minute :-)

All raises are good raises.

Just to emphasise that  UK tax is actually closer to 50% because of what is called National Insurance contributions, but are actually a tax.

For these reasons, it pays all US persons to take UK tax advice before coming over as there are several tax and social security breaks available, depending on circumstances.

This is a good calculator for withholding of taxes and NI contributions.

http://www.e-gismos.com/ukpay.asp

For 2006, on an income of 37,295 you would pay 6,838 in taxes and 3,173 for a total of 10,011, which would tranlate into 26.8% of your income, so saying that 50% goes to taxes is a bit of an exaggregation.

i just tried that last website and it makes no sense - there are so many blanks, what do you fill in to get what you want?

The only thing you need to fill out is the gross salary. Then just click "Compute" and all the other fields will be populated.

Actually, it makes it more like 42%. We're not a socialist state, yet, but I'm sure we're getting there.

Just to emphasise that  UK tax is actually closer to 50% because of what is called National Insurance contributions, but are actually a tax.

For these reasons, it pays all US persons to take UK tax advice before coming over as there are several tax and social security breaks available, depending on circumstances.

He was talking about the tax rate, not the "effective" tax rate i.e., 50% on everything above approx. 36K (incl. NI it's actually, closer to 42%). Nobody pays 50% or even 42% on everything they earn. Even on 100K your overall deductions (incl. NI) for the year would be about 37K and therefore make for an "effective" tax rate of 37% on a 100K salary. That's for a single person. Having dependents will lower that figure.

This is a good calculator for withholding of taxes and NI contributions.

http://www.e-gismos.com/ukpay.asp

For 2006, on an income of 37,295 you would pay 6,838 in taxes and 3,173 for a total of 10,011, which would tranlate into 26.8% of your income, so saying that 50% goes to taxes is a bit of an exaggregation.

The power to tax is truly the power to destroy. How many people/families struggle each month because of deductions from their pay packets? An extra 200 or so a mth (if the gvt cut taxes), esp. for lower middle class earners, would make a big difference in their lives, as well as help boost the economy.

The gvt should be run by laissez-faire economists.

Here's another web site for calculating your actual net pay: http://www.1do3.com/uk/page.php?x=3,506,4793

Remember to deduct pension payments from your gross as they are pre-tax ££s.

ex. Gross salary $2000.00 - pension contribution £100.00 = taxable salary £1900.00, likewise with other deductions like child allowance

Tentplanet,

I realize that he talked about the tax bracket, but in my opinion it doesn't make any sense to look at anything besides the effective tax rate since that's what you actually would pay, and especially when you are comparing it to another country's tax rate.

If you were to make $180,000 in the US (Ohio), you would pay the following if you are a single person:

- Federal taxes $43,863 (24.4%)
- State taxes $10,985 (6.1%)
- Social Security tax $5,840 (3.2%)
- Medicare $2,610 (1.5%)
- City tax $3,780 (2.1%)
- Health insurance $1,300 (0.7%)

If you add them up, you would pay $68,378 in "taxes" for an effective rate of 38%. Compared to your figures below you would pay higher "taxes" in the US than in the UK. Now I know that in some states you don't have to pay state income taxes, so it would be different for people in those states, but the majority lives in states that tax income.

I think there are a lot many people struggling in the US due to laissez-faire capitalism than in the UK (check percentages living in poverty for example). I'm not arguing that pure socialism would be the ideal solution, but I think there can be a happy medium between capitalism and socialism.