At what income do you start paying higher rate income tax?

[Ari]

I'm slightly confused by the HRMC web site.

It says that for 2014/15 the rates are:

Personal allowance - £10,000
Basic rate limit - £31,865
Higher rate threshold - £41,865

So does that mean that if you earn £31,866 you pay nothing on £10,000 of it, 20% on £21,865 of it and 40% on £1 of it?

Or can you earn £41,865 of which £10,000 is tax free and the rest taxable at 20%? And on £41,866 you'd pay the same plus 40% of £1?

This is the site:

http://www.hmrc.gov.uk/budget2013/tiin-2531.pdf

[scottri]

Your 2nd example is correct. Try this link....
http://www.listentotaxman.com/m/

[NerveAgent]

Ari said:

Or can you earn £41,865 of which £10,000 is tax free and the rest taxable at 20%? And on £41,866 you'd pay the same plus 40% of £1?

This.

Its a common source of confusion,

[blank]

And don't forget pension contributions.

If you have say a £44k PAYE salary, you probably have a company pension scheme. If you pay in 10% then your taxable earnings are effectively £39.6k. So you won't be a 40% tax payer. Unless you have a company car...

[Eric Mc]

In fact, any permissable Salary Sacrifice scheme will perform the same trick - such as "Bicycle to Work" or "Child Care Vouchers".

[theboss]

plus don't forget national insurance contributions, any dividend income, etc etc etc

they make it really simple don't they

[10 Pence Short]

I'm in the enviable situation of being on the threshold in terms of salary, but with a company fuel card and car, meaning I'm taxed at 40% of about £8k I don't earn. I wouldn't mind, but it' a fking Avensis!