Sorry guys, tried to find the answer but I'm still confused. I need to find out whether I am a higher rate taxpayer or not. It’s important as greatly affect childcare vouchers, which we are very soon to start having. Answer would be appreciated in plain english!
Probably easier to use a hypothetical example rather than my personal finances. All figures are annual before any tax
Income £35,000
Car allowance : £6000
Annual bonus £1,000
Total £42,000
Pension contribution by employee: £1,500
Total £40,500
Other income - £0.
Question is, since the personal allowance for 2013/14 is £9,400, does this get deducted from the above before tax is calculated? Ie leftover is £31,100 (based on including pension payments) so if the HMRC site says you pay 40% on income over £32,010 that means you are avoiding being a higher rate taxpayer?
Also, if take home pay or bonus increases, is it therefore better to increase pension contribution to keep under the threshold?
Help is greatly appreciated!!
Probably easier to use a hypothetical example rather than my personal finances. All figures are annual before any tax
Income £35,000
Car allowance : £6000
Annual bonus £1,000
Total £42,000
Pension contribution by employee: £1,500
Total £40,500
Other income - £0.
Question is, since the personal allowance for 2013/14 is £9,400, does this get deducted from the above before tax is calculated? Ie leftover is £31,100 (based on including pension payments) so if the HMRC site says you pay 40% on income over £32,010 that means you are avoiding being a higher rate taxpayer?
Also, if take home pay or bonus increases, is it therefore better to increase pension contribution to keep under the threshold?
Help is greatly appreciated!!