Income Tax

[flip-flop]

Have just been paid and have been taxed �2000 - now I have no major objection to paying tax at 40% on part of my earnings, but can anybody tell me why the threshold isn't adjusted annually??? (and yes, I know that to get taxed at �2000 means I'm earning reasonable money and should be happy - and I am - it just seems wrong that the threshold isn't adjusted!!!).

[kags]

You should be given a proprotion of the threshold each month/week, unless this is a 2nd job and you are using your basic rate allocaton elsewhere. In this case, you may be issued with a D0 tax code, meaning "tax everything at 40%". By month 12 of the tax year, you should have had all of your basic rate band, unless you have a non-cumulative tax code (week/month 1) .If this is a new job and you weren't working before in the tax year, you may not get the unused basic rate band from previous months until you are allocated a tax code by HMRC.

Are you saying you earned �5000 gross and paid �2000 tax on it? What is your tax code?

[kags]

or was it a bonus or some other type of one off payment? Such payments can distort the PAYE system, you would get the benefit of unused basic rate band from previous months in the tax year, but not for future months. The tax will have to work itself gradually out over the subsequent tax year.

[Loosehead]

The allowance is adjusted anuallt but by very small amounts much less than wage rises so over the years more and more people are in the higher rate tax band. When I first started working the 40% threshold was so far away I never thought I'd get into it in my working life however it's been used by both Labour and Tories as a stealth tax. The original idea was a higher rate for high earners. 20 years ago less than 1m people paid HRT now I beleive it's closer to 6 million.

[kags]

doh! i went off on a bit of a technical ramble there, when it seems your question was more general. Now if you were my client I could have charged you �200 for the advice you never asked for...................

[dzug]

err the threshold IS adjusted annually roughly in line with (price) inflation

[Miss Zippy]

That's fiscal drag for you! Under Mr Brown, there are now 3.5m higher rate taxpayers, compared to 2m in 1997. Personal tax allowances simply haven't kept up with rising salaries, hence more and more 'average' income people are paying 40% tax on anything they earn over �38k, which is hardly a high income (relatively speaking).

[WendyS]

Write to Gordon Brown. It's all his fault, not adjusting tax allowance in line with earnings.

[rescuer]

Write to Mr Brown? Why? Are you suggesting he can read?