Income Tax Rates the governmnet don't want you to know about....

[IR35FanClub]

Am I wrong...?

The first thing I did as a contractor ( a few years back) was look at what the real income tax was. As in - PAYE + 2 lots of NI.

Just done it again for this year... OMG...

Tax Band/Type Thresholds Employee Employers PAYE Total Tax

NI Lower Earnings Limit £5,564 0% 0% 0% 0.0%
NI Secondary Threshold £7,488 0% 13.80% 0% 13.8%
NI Primary Threshold £7,488 12% 13.80% 0% 25.8%
PAYE Threshold £8,105 12% 13.80%2 0% 45.8%
Higher Tax Threshold £34,370 12% 13.80%4 0% 65.8%
NI Upper Accrual Point £40,040 12% 13.80%4 0% 65.8%
NI Upper Earning Limit £42,475 2% 13.80%4 0% 55.8%
Additional Tax £150,000 2% 13.80%5 0% 65.8%

I guess thats to pay off the £77,000 per person the last government borrowed to pay for running day to day services. I tend to do that in my personal life too - NOT!

[IR35FanClub]

Er, how do I get a html table to post properly!???

[Sockpuppet]

Er, how do I get a html table to post properly!???

Tax Band/Type	Thresholds	Employees	Employers		PAYE	Total Tax
NI Lower Earnings Limit	£5,564		0%		0%		0%	0.0%
NI Secondary Threshold	£7,488		0%		13.80%		0%	13.8%
NI Primary Threshold	£7,488		12%		13.80%		0%	25.8%
PAYE Threshold		£8,105		12%		13.80%		20%	45.8%
Higher Tax Threshold	£34,370		12%		13.80%		40%	65.8%
NI Upper Accrual Point	£40,040		12%		13.80%		40%	65.8%
NI Upper Earning Limit	£42,475		2%		13.80%		40%	55.8%
Additional Tax		£150K		2%		13.80%		50%	65.8%

[kingcook]

I'm trying really hard to understand the point you're trying to make... maybe i've had too many beers tonight. Will try again in the morning

[centurian]

There is an error in your figures in respect of Employers NI.

Employers NI comes off first, and then employee's NI and income tax is applied to what is left. This slightly reduces the overall percentage amounts of employee's NI and income tax when compared to the full starting amount.

Secondly, Employers NI is not a percentage of the full gross, but a percentage applied to the employee's gross.

If you start from the full gross, the 13.8% of employers NI is effectively 12.12% of this amount.

However, it's still a lot of bloody tax.

[Clare@InTouch]

You also lose your personal allowance when you go over £100,000, which bumps it up a bit (60% marginal rate for a slice of income).

Centurian is right about the Employers' NI - it's paid by the Employer, not by you, and it's applied to the gross. So your end total tax figures are all 13.8% too high.

You're also only looking at PAYE - you'd get slightly different results if you looked at the usual contractor position of small salary, CT and dividends.

[Ignis Fatuus]

Centurian is right about the Employers' NI - it's paid by the Employer, not by you, and it's applied to the gross. So your end total tax figures are all 13.8% too high.

With respect, I know this is an old argument, but Employer's NICs are paid out of the payroll bill, so IMHO it matters little which party has the duty of handing it over to HMRC - it's still an income tax.

[Clare@InTouch]

With respect, I know this is an old argument, but Employer's NICs are paid out of the payroll bill, so IMHO it matters little which party has the duty of handing it over to HMRC - it's still an income tax.

True - I suppose it depends on the status of the employee as to whether it's a tax on them that they'd notice. An employee of IBM feels no effect of the Employer's NI, whereas a contractor under IR35 would as it reduces his pay.

[IR35FanClub]

I'm trying really hard to understand the point you're trying to make... maybe i've had too many beers tonight. Will try again in the morning

LOL, really im saying that if most people in permie land knew what they were losing of THEIR potential earnings, there would be mass protest. Its only working as a contractor where you can see what you would lose from invoice value through to money in your pockets that makes you wake up and realised what is worng with the system. Theres no way any government can justify taking more of the money you earn than you get yourself.

I am suppoort of the taxpayers alliance proposal to abandon NI and tax everything under PAYE. The gov need to stop dicking about with rates and thresholds and just say we need to raise X billion so you all get £10k tax free and then any income from any source after that is taxed at something like 30-40%. In real % terms if the rate was 40%, the effect of the tax free allowance is that you would be paying 30% on 40k gross, 35% on 80k gross and 36% on 100k gross. Ie you could work out from your gross salary what you would be earning this year, rather than needeing a spreadhsheet and a couple of websites to work it out!

That is a fair system. It doesnt matter whether your income is from a job, a ltd company you own shares in, or selling an oil painting, its income and its taxed. It probably needs more work to define what is income, but makes it much simple than the silly bands and threshold the gov keep deceitfully playing with. Last year they said they were keeping tax the same. Yet dropped the 40% threshold and lowered the NI threshold. If that isnt lying about tax then I am a monk.

[IR35FanClub]

With respect, I know this is an old argument, but Employer's NICs are paid out of the payroll bill, so IMHO it matters little which party has the duty of handing it over to HMRC - it's still an income tax.

I disagree it matters little.. you HR / Payroll person doesnt really care what the number is, they work it out and hand it over.

The MD probably cares as it comes off his bottom line, but he's only got one vote.

Now imagine if you said to the employees.. that could be your money that, but the gov have it instead.

And lets not forget NI is basically a tax so the £8000 we get tax free isnt tax free. NI employers starts before this. Its all b-lox and we should be getting a payslip that shows how much of our potential hard earned goes to the exchequer.