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[science_expat]

As a result of a recent salary adjustment, I have just entered the 40% tax bracket (which I've learned is based on taxable pay, not gross). Fair enough. But my take-home has gone down by a few pounds.

As I understand it, the 40% is only on the amount above the threshold. Hence I can see how I see less of the salary increase than I would have had I stayed in the same tax band. But I cannot fathom how my net pay has decreased.

Can anyone explain this (i.e. am I thick) or is it likely that finance has screwed up? (They claim it's the 40% thing.)

Cheers,
SE

[wegie]

Sounds more like finance getting it wrong. Although there always used to be a nasty spot right at the top of the basic rate where the tax bands and NIC bands didn't coincide and you ended up paying an effective rate of 51% on a chunk of income.

Try sticking your new gross salary and your old gross salary into a tax calculator and see what you get!

[qrypt]

Net pay shouldn't decrease.  The only think I can think of is that someone in finance got worried about the impact of the salary change and overreacted in calculating PAYE.  If that's the case, then it should still work out okay on an annual basis, even if the deduction for a particular month is incorrect.  Since the year is almost over, if this is the case then it should come out in the wash soon. 

But this is a generous interpretation, and it's also easy to imagine they just got it wrong plain and simple.   

[expatinuk]

Yep but in the new tax year we should get some relief.

Welcome to the 40% band Science.... does it make you feel as rich as Richard Branson? Isn't he in the 40% band as well?

[scotia]

Is it possible that they need to claw back some tax that should have been paid on previous months' earnings? This happened to me when I crept over the 40% threshold and the finance office was a little slow on the uptake.

And if it has not already happened, watch out for a nice little billet doux from the tax man, who loves catching up with the 'rich' 40% payers and extracting more tax from investment income.

[qrypt]

And if it has not already happened, watch out for a nice little billet doux from the tax man, who loves catching up with the 'rich' 40% payers and extracting more tax from investment income.

Oops. Might this attempt apply to, um, foreign investment income? 

[scotia]

grypt - they soon gave up on me as a likely source of much income and I have been downgraded to a 2-page form (I think I was costing more to process than they could recoup). I do seem to remember there was a section in the main form for overseas investment income, but there were various exclusions. These may have related to whether you were taxed on the income elsewhere: if not, I suspect HMRC would see you as fair game.

[drspouse]

It's at this point that you can start to claim back bits and pieces including the extra tax on donations made to charity - including, now, donations in kind (only several million years behind being able to do the same in the US!).  We got a receipt from a charity shop telling us how much they'd made on a sizeable clearout of books and CDs we had, which (if either of us were in that tax bracket) would be helpful.