40,000 tax

[Count Muppet]

I have heard that when you earn 40,000 you pay a higher tax but I can't find any info on it. I'm not at the stage where I am earning that much but probably could do if I done overtime. Does it work out better to earn 39,000 than 41,000? Or do you only pay the extra tax on earnings above 40,000?

[grahamparker]

Basic tax rate 20% on annual earnings above the PAYE tax threshold and up to £34,370

Higher tax rate 40% on annual earnings from £34,371 to £150,000

Additional tax rate 50% on annual earnings above £150,000

Emergency tax code 810L

 

Taken from here.

 

http://www.hmrc.gov.uk/paye/rates-thresholds.htm

 

 

But if your are a director,pay yourself dividends then you only pay corporation tax on the dividends which is a lot lower.

I only earn 15,000 a year that is taxed but then get 20,800 in dividends.(£450 a week)

[Count Muppet]

Too be honest, I did see all those figures online but can't work it out. Maybe I should sit down and work it out. I want to do a bit of overtime to clear some bills but don't want to get into the situation where I work myself into more debt.

[grahamparker]

From what i was lead to believe you only pay the higher rate of tax on anything earned over 34,371 but i may be wrong.

[petercoulson]

You only pay the higher rate on the portion of pay over that rate, not the whole pay packet

[Count Muppet]

Ah, that's good then. It makes sence that way. I'll do some overtime then and get the bills down.

Thanks for the replies