Another Higher Tax Rate Question

[bednobs]

my husband earns about 42k a year (where does all our money go??) he gets childcare vouchers taken off his gross salary of 243£ PCM do they count to bringing you down to the BR tax?

[Old_Geezer]

I think your money must go the same place as mine. I think much of mine goes on the mortgage. Then there is fuel for the car. And the rates, domestic & water. And one has to eat and clothe oneself. Run like mad just to stay still.

Er ..... sorry no idea how the taxman manipulates tax but I'd suspect not. Sounds too generous to me. Unless there is some kind of salary sacrifice scheme fiddle involved.

[buildersmate]

Under certain circumstances, HMRC allows the cost of childcare vouchers to be deducted from gross earnings (so they are free of both NICs and income tax). Whether your husband is entitled depends on the detail of the scheme - the rules are in this leaflet.
http://www.hmrc.gov.uk/leaflets/ir115.pdf

However the easier way to work out whether he's been tipped into the 40% tax bracket is to take a look at the personal allowance coding he's been given by HMRC for this tax year (2013/14). If it says 944L, he has the full persoanl coding and he will just about scrape under the threshold - especially he is in a contributary pension scheme. If it is considerably less than 944 - say around 600, then he's being 'charged' for his childcare vouchers through a reduction in his tax code. This would seemingly throw him into the higher rate bracket.

It's not the end of the world, you know - some group's got to pay for all these social schemes and endless extra demands being fought for in places like the NHS. Ed Balls may keep whining on about millionaires benefitting, but there are precious few of them to fund the country - it's the millions of middle-income earners that really fund the country.

[bednobs]

i completely agree BM, i would love it if he earned enough to be in the higher tax bracket, and would shout about it everywhere. I was asking because the thread below made me wonder, and i asked him and he didn't know!

[factor-fiction]

If your husband does just go over the threshold for higher rate tax I'd suggest he consider using it to top up his pension contributions via AVCs by just enough to keep him below the threshold. If he paid £60 a month net he'd effectively get £40 added by HMRC