What percent of tax do I pay if I earn£45000 in a tax year?

Asked by Bretto123

1 Answer

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Answered by Richard Salter, IFA in Trowbridge, WILTSHIRE
UK income tax now allows everyone at least £8,105 of income in a tax year before being hit with income tax on any income over that threshold. There are higher thresholds for people aged 65 or more. However assuming you are below 65 then someone with 'taxable' income totalling £45,000 then the process is as follows:-

£45,000 of taxable earnings/income less £8,105 personal allowance leaves £36,895 taxable.

The first £34,370 (reduced from £35,000 last tax year) of taxable income is then charged to 20% 'basic' rate tax.

In your case the £2,525 not taxed at the current 20% 'basic rate' will fall into the higher rate (40%) tax bracket.

Your actual total income tax bill will therefore be

£34,370 x 20% = £6,874

£ 2,525 x 40% = £1,010

A total income tax bill of £7,884

You will be left with £37,116 or £3,093 of net monthly, after income tax,income. In shorthand someone who has part of thier inocme taxed at the higher rate (currently 40% ) is simply described as being a higher rate taxpayer. However as you can see the vast majority of your earnings are actually liable to basic rate or indeed nil income tax.

Sadly anyone with earnings will also incur National insurance charges - with employees now being hit by no less than 12% tax on any earnings between the 'earnings threshold' of £146 per week and the 'Upper earnings limit' of £817 per week.

There is also a 2% National Insurance rate tax on any earnings over the UEL. Unfortunately this will include you as earnings over £817 a week translate into the equivalent of £42,484 a year !! | 05.16.12 @ 10:49
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Answered by

Richard Salter
Richard Salter, IFA in Trowbridge, WILTSHIRE

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