How Much Can You Earn Before Paying 40% Tax?

There are currently 3 rates of  tax on wages:

1. The basic rate of tax – 20%

2. The higher rate of tax – 40%

3. The additional rate of tax – 50%

2008-09 2009-10 2010-11
Basic rate: 20% £0-£34,800 £0-£37,400 £0-£37,400
Higher rate: 40% Over £34,800 Over £37,400 £37,401-£150,000
Additional rate: 50% Not applicable Not applicable Over £150,000

Even though the above table shows that you start paying the 40% rate of tax after earning £37,400, remember that everyone that works in the UK is given a tax free allowance (currently £6,475). This means that you could earn:

37400+6475 = £43,875 before paying the higher rate of tax of 40%

Remember that you only pay 40% on any income above the higher rate of tax, not your entire salary. So any pound over this amount will be taxed at 40 pence but any amount before will still only be taxed at 20 pence in the pound.

Let us know if you have any questions about this, in the comments below.

52 comments

  1. rachel says:

    I currently work for the council but my husband runs his own business and has asked me to do the admin for his company. My council post pays 29500. I don’t want to go over the allowed amount and end up in the 40% bracket how can I work out what I can earn a week and will I be taxed more on the second job than the first?

  2. annette innes says:

    i will reach retirement age in november2013 so will be eligible to recieve my state pension which i have been told will be

  3. gary stewart says:

    i currently earn a basic salary of £18500 but i get an extra £110 before tax for going on call for a week but its seems as though im getting taxed 40% on my overtime is this right ?

  4. Linda Taylor says:

    I currently earn £32,700 plus started to draw my old age pension £5824 and my tax code is now 134 is this correct as I have just read above that everyone has a tax free allowance of 6475.00

    Kind regards

  5. A Price says:

    How many days do I have to spend outside UK , to not have to pay tax in UK ?

  6. Lisa says:

    Is this still the current rate for this year 2011/12?

  7. gavin forshaw says:

    if i earn 40,000 a year how much tax wouid i pay?

  8. Jason says:

    My income is 25k but I have done overtime and I am at 40k after April do I pay 40% all the time even if my basic is 25k?

  9. aaron says:

    i earnt £34,353 and have paid £6870 in cis deductions of 20% but when i do my online return it says i have to pay £995 why is this ?

  10. Adrian says:

    Higher tax rate (40%) for 2011-2012 is

  11. Robert Sharples says:

    I have 2 incomes which together take me over 46000. The tax man has split my personal allowance over both incomes so I pay basic rate.Does this mean I will still get child benefit in 2013

  12. jo says:

    i earn 20926 a year but i have been doing alot of overtime which will mean by april i will have earnt over 43000 in a year will my tax code change the following year to 40% just because this one year i worked loads of overtime?

  13. Becki says:

    If i was to earn over the threshold for 20% tax would i pay tax on the whole amount or just the amount i was over the 20% threshold i.e if i earned £50,000 would i pay 40% on £50,000 or 20% on £43,875 and 40% on &6,125?

  14. perry says:

    I’m currently on a salary of £35,000 a year paying ni and tax at 20%. Im wanting to do freelance work, but what can i earn before i pay 40% tax with my second income.

    The reason im thinking about a second income is to increase my chance in getting a mortgage.

    thanks
    perry

  15. perry says:

    I’m currently on a salary of £35,000 a year paying ni and tax at 20%. Im wanting to do freelance work, but what can i earn before i pay 40% tax with my second income.

    The reason im thinking about a second income is to increase my chance in getting a mortgage.

    thanks
    perry

  16. thomas ford says:

    i have an annual pension from the prison service of 18000.00 i also work partime with an annual salary of 15000.00,how much can i earn in overtime before i pay the higher rate of income tax of 40p

  17. andy webb says:

    if i pay 40% on my wages do i have to pay 40% on my pension

  18. Ron says:

    I was made redundant and took early retirement with a pension of around 19k per year in 2010,in March this year I was sent via my pension provider a tax coding of D0 which meant I was to be taxed at 40% on inquiring why the coding change I was informed that I had been put on this code because I had a second income from my job,to which I explained that I had been made redundant and that I had no second income.
    The coding was changed but it took 2 months to resolve with HMRC and my pension provider.The place where I worked is coming back online later this year and I was asked if I would be willing to return on a 3-6 month contract would this put me on 40% taxation from day one or would I be taxed at 40% once my incomes exceed £37400.

  19. Ian Nicholson says:

    Hi there, looks like I was on the wrong tax code last year and should have been zero. If this is the case and I shouldn’t have received any tax allowence and have to pay back the tax. How do I work this out please ? Or do I just take 647L £6470 x 20% = £1294.00 owed ?

  20. Barry says:

    I am working a lot of overtime at present and my tax payments seem to have risen quite high although i am nowhere near 20,000 so far in this tax year! Is it calculated on possible earnings?

  21. jordan says:

    If I were to get a job earning £400 GB pounds per week how much would I be taxed?

  22. Nyasha says:

    how many days off are you entitled to if you work 40.5 hours a week fulltime

  23. Syed Qadri says:

    So if I have two jobs, one with a salary of £24,938 and the other of £14,150, I will only get taxed 20%?

    Thanks

  24. Jack Hargreaves says:

    i am getting paid £15 for a friday night and a saturday night and working 4 hours on a friday and 4 hours on a saturday. so will i get taxed and if i do how mutch will i get taxed.

  25. na says:

    do i need to pay income tax this week as i only earnt 89 pounds?

  26. D. Brown says:

    Has the tax threshold above which 40% tax is paid, been reduced from April 2011, my employer claims that this is the reason why, despite my tax code raising from 313L to 413L, I now pay more tax monthly than last year?
    Appreciate any guidance.

  27. Clive says:

    if my income is 36.565 do I pay the tax on just this amount or my earnings after materials, sub contractors, fuel etc have been deducted from amount

  28. Kerrie Bennett says:

    How much can I earn before tax

  29. Rosie says:

    Hi

    I earn £42300 at the moment and am due a payrise in the next month. Am i right to think this is going to take me into the 40% taxband? Will i be worse off by accepting this payrise and how much would I need to be given to make it worth my while?

    Many thanks

  30. dean cooke says:

    is this after all your exspencses taken of what you have left or the 37 400 is that before you take off your exspencses thanks

  31. Imran says:

    Please help my query

    I have a commulative salary this year is 45875 in 10-11.

    i.e. 33075 2010-11 Salary
    and 12,750 backdated pay from November 2008 to March 2010. I received this settlement in April 2010.

    I understand that I have to pay

    0% on 6475£ and

    20% on 37400

    and the rest £2000, do i have to pay 40% ? Although the excess was a part of previous years?

    Please answer.

    Thanks

  32. shane says:

    hi i currently earn £1000 week and pay 40% tax is there a way of putting my wife on the company books to get my earnings down to 20% tax bracket

  33. Steve Howard says:

    By the end of this tax year 2010/11, my earnings will be over 43,875, limit for the 20% tax, how will the 40% be taken, will my tax code change for 2011/12 ?

  34. Anonymous says:

    Do you have to pay tax if your employer pays the rent for you and (how) should that be registered on your payslip?
    Is there a real advance? or getting a higher salary (below 43.875) without rent will result the same?

  35. Dinesh says:

    If i work in UK how much % of my salary should i have to spend in UK and how much i can save per month.

  36. scott says:

    I have earned 41’000 already this year but most of my earnings come from overtime i work around 60 hours per week, will i get taxed 40%?
    If so i might aswell have the next 2 months off.

  37. bob says:

    im a paye should my £22 expences(for food) be taxed.they go in my pay slip bringing my yearly wage over £43.875

  38. Joanne says:

    Hi!

    I wanted to know if I will be taxed the higher band of tax 40% if I earn comission this month and work overtime!

    My basic Salary is 14000 but with my overtime and comission the nett income this month is £5200, does that mean I will have to pay 40% tax on this even though my annual salary will not go over into this bracket?

    Thanks

    • TaxFix says:

      Joanne: You should only pay 40% if you are a higher tax rate payer taking into account all your income for the year. If you do pay 40% on some of your income for the month you can make a claim for a tax refund at the end of the tax year.

  39. john says:

    if i earn 36,000 a year and have a pension of 6,500 a year will i still only pay 20 per cent tax

  40. andrew carmichael says:

    i earn £18000 annually and i also have a second income of£500 as a matchday steward how and how much will i be taxed please. thankyou

  41. jonesy says:

    Hi

    I currently earn £33.5k gross year.
    I have rental income of £7k gross

    My total gross yearly income is £40.5k

    My tax free allowance is £6475year.

    Will i pay the standard 20% tax on the remainder of my yearly income ?

    thanks

    • TaxFix says:

      jonesy: You can deduct any allowable expenses from the rental property, and the tax will be payable on the profit (revenue minus expenses). The basic rate of take is 20% yes.

  42. Anonymous says:

    if i pay basic rate income tax but work a lot of overtime in a month, could the part of that monthly salary with overtime be taxed at 40 percent

  43. Anonymous says:

    I will be leaving the army shortly with a 12500 immediate pension, taxable of course. How much can i earn in my new job before i will have to pay the 40% tax.

  44. Anonymous says:

    i have lost my partner and been left a lump sum of 8000 pounds from a pension he was in should i pay tax on it

  45. Anonymous says:

    I am working outside the UK I get paid from the UK and get taxed on my full wages, i am out of the country for 174 days am I able to claim some tax back?

    • TaxFix says:

      Anonymous: According to the Inland Revenue, you become non resident and should not pay tax if:

      Normally you leave the UK to work abroad full-time, you will become not resident and not ordinarily resident in the UK if:

      1. Your absence and employment from the UK covers a complete tax year (that is 6 April to 5 April)
      2. You spend less than 183 days in the UK during the tax year
      3. Your visits to the UK do not average 91 days or more a tax year over a maximum of four years

  46. Anonymous says:

    I am working my partner is retired 2 years what am I entitled to tax benefit.

  47. Jo says:

    I’ve been given a raise, backdated to 2007. The problem i have is that i am in the higher tax bracket and all of the backdated pay will be taxed at my current 40%, when if i had been paid it in 2007 and 2008, it would have been taxed at 20%. Can i claim this back or do anything about it? It amounts to thousands!

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