Higher tax rate query

Then either the Pru site is wrong or you're misinterpreting it. The £33,300 is the amount of "taxable income" which doesn't include the personal allowance, so the relevant figure for your purposes is £5,035+£33,300 = £38,335.

The £7,185 includes the personal allowance and the £2,150 10% band, so it makes no sense to add 7185 and 5035. The £33,300 includes the 10% band, so the width of the 22% band is £33,300-£2,150 = £31,150.

Isn't the amount you are looking at £33,400.

What's the link?

No.

It depends on your situation.

It's not your salary that is the important point. It's your total income.

The majority of working people would not pay tax at 40% until their income was over £38,335.

No, shows £32,400 for 2005/6 and £33,300 for 2006/7.

I'm wondering why they're showing allowances for 2006/7 and 2007/8, but bands for 2005/6 and 2006/7. You'd have thought they'd show complete information for the same pair of years, instead of for just one year, with partial information for two others.

I took the information from the same place so I must be cracking up!

I would have thought they would have had complete information for

2005-2006 because the deadline is for submission is 31 January 2007 and complete information for 2006-2007 because it is the current year. The personal allowances have been decided for 2007-2008 but the rates have not been decided. It would still be better to have a matrix with the three years showing even if they put something like "to be decided" in the 2007-2008 taxable bands.

That gentleman in the other newsgroup has a lot to answer for!

Thanks for the replies - it's becoming a bit clearer to me now!

I'd always assumed that once your salary hit a certain point then you became a higher tax rate payer, but now I know better :-)

Oh - that link I was looking at is here:

Thanks again,

Jeff

There's a certain fascination with someone explaining how the system should be improved yet at the same time saying he doesn't understand the system.

Thanks

You misread the table. It should have been obvious to everyone when you said: "Looking at the Prudential site, it says £40,485 (ie £5,035 personal allowance + £7,185 at 10% + next £33,300 at 22% = £40,485)"

So the table from the Pru is simply wrong..?

Yes.

There is a spurious reference to £32,400 in the first column.

The other mistake is that, having referred to "the first £5035" and "the next £2150", it is then wrong to refer to "the next £33,300", because those 33300 includes the 2150, i.e. it is the combined width of the first two taxable bands, not just the width of the 22% band.

Hence taxable income of £33,300 is the most you can have without paying higher rate, and of this £33,300, the first £2150 is taxed at 10% and the next/other £31,150 at 22%. Adding the £5035 personal allowance means your total income can be £38,335 before the 40% rate kicks in.

The £40,485 figure is wrong and should be £38,335.

The £7,185 figure is correct. You can have that much income before paying tax at 22%. If you earn £7185, you pay only £215 tax.

Some is wrong and a mistake has been made in the addition above: £7,185 should be £2,150 (The £5,035 has been double counted). As Ronald said you want to look at this link