23 Apr

Income Tax for dummies.

50% tax rate – GET OVER IT.

Alistair Darling, bless him probably the hardest few days OF HIS LIFE!  Delvering a budget in the biggest rescion the uk has seen since world war 2.  The expectation that he can single handedly make some decisions and save our countries financial struggles.   Yeah right.

In times gone by I dreamnt about stading outside number 10 with the red case of doom, ready to deliver THE speech. God has taken me elsewhere …. thank gooness!!

Any way, a lot of banter around about this 50% tax rate and how hard it is going to hit people. BOG OFF.

  1. Most people complaining, are NOT earning enough to be affected.
  2. If people are earning over 150K they can pay a bit more.
  3. A lot of people forget how our income tax system even works in the first place.

Sorry to bore people, but half my degree was in accounting, and our system is not that complex, honestly …

CURRENTLY YOU PAY (not taking account of ANY allowances or contibutions etc)

0% on the first £6,035 of your income.
22% is paid on the next £28,765     (total so far £34,800)
40% is paid on the money over £34,800

Example A your annual income is £42,000.   (not likeley for me!)

0% on the first £6,035 of your income.    ——————————- £0
22% is paid on the next £28,765     (total so far £34,800) ————£6,328.30
40% is paid on the money over £34,800 (42k – 34.8 = 7.2k)———£2880   — total = £9280.3

Of course this is calculated and spread out amungst your pay packet if you are an employee in the UK.  (about £786 out of a £3500monthly pay packet.
Example B.1 you annual income is £175,000.

0% on the first £6,035 of your income.    ——————————- £0
22% is paid on the next £28,765     (total so far £34,800) ————£6,328.30
40% is paid on the money over £34,800 (175k – 34.8 = 140.2k)———£56080   — total = £62408.3

which is £5200 a month out of £14583 a month pay packet.

Now the introductoin of the 50% tax rate

Example B.2 you annual income is still £175,000.

0% on the first £6,035 of your income.    ——————————- £0
22% is paid on the next £28,765     (total so far £34,800) ————£6,328.30
40% is paid on the next  £115200  (total so far £150,000)———–£46080
50% paid on the rest over £150,000 (175K – 150k = 25k)————£12,500  total = £64908.3 or £5409.3/month

so the POOR POOR guy now has only got £9174 a month instead of  £9383 a month to spend…. a grand total of 2.3% drop in his month cash.

big effect I DON’T THINK SO.  yes i admit the bigger the income the bigger that % will become but seriously, 1) that is not going to be enough money to cover the governments borrowing, 2) there are only 205K people earning over £150k a year that wll be affected.   They probably work for the banks or the government anyway the very people who got us into this mess!!!!

For more info the OFFICAL site is ..

http://www.hmrc.gov.uk/rates/it.htm

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