In a recent poll* half of respondents wrongly believed that, once you hit the higher rate income tax threshold, the 40% higher rate applies to ALL your earnings.
The Higher Rate Income Tax % actually only applies to your additional income over the basic tax rate band threshold.
For people with a standard Personal Allowance of £12,570 this means that income tax (2024/2025 rates) is charged at 20% for all earnings between £12,570 and £50,270; after which the earnings above that are taxed at the higher and additional rates.
Up to date details of the income tax bands and personal allowances can be found at www.gov.uk/income-tax-rates.
Many PAYE high earners need to file a tax return due to circumstances such as:
If you do not usually send a tax return, you need to register by 5th October following the tax year you had the income, so it is always wise to make an enquiry as soon as possible.
If you are unsure, about working out your tax due or how to correctly reclaim any tax relief, feel free to contact us here or email enquiries@mgaservices.co.uk to see what MG Accounting Service UK Ltd can do for you.
*Half the British public doesn’t understand income tax (taxpolicy.org.uk) 2024 poll from Tax Policy Associates and WeThink