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I've recently been trying to calculate different take home amounts from different salaries, and have ended up getting confused over how the different tax brackets work. If I try to calculate the amount for a salary below the higher tax bracket (£35k - 40%), then I don't have any troubles, so I'm assuming I'm misunderstanding what happens exactly after this, and further, tax brackets.

Simple example

Working out take-home amount for £45,000.

Currently, UK Income Tax rates are:

£0 - £7,475         0%  
£7,476 - £35,000    20%  
£35,001 - £150,000  40%  
£150,000+           50%

So, from what I know, on a £45,000 salary:

(45,000 - 35,000) * 0.4
    = 4000
(35,000 - 7475) * 0.2
    = 27525 * 0.2 = 5505

Meaning £9,505 to be taken off as tax. Correct?

But when I use The Salary Calculator site, it tells me that £8,010 is income tax.

Can anyone tell me what the correct figure should be, and where I'm going wrong in my calculations? Also, if you could point me in the direction of some decent tutorials/articles on this sort of stuff, that would be most welcome!

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Jaymz
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1 Answers1

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The taxable bands are on top of the personal allowance (though by the 50% band, the personal allowance has reduced to 0 so there's no difference).

So the right calculation is

(45000 - 42475) * 0.4
    = 1010
(42475 - 7475) * 0.2
    = 7000

making £8,010 as expected.

Ganesh Sittampalam
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