this post was submitted on 27 Aug 2023
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[–] [email protected] 4 points 1 year ago

Yeah I left out NI for brevity lol. TL;DR for everyone else, in the last couple years they changed the boundaries for NI to match those for income tax. NI is 0% for the first £12,500, 12% up to £50k, 2% over £50k. So really you can just combine it with income tax, and the total tax bands are 0%, 32% and 42%. This means the take home tax rate difference is only 10%, not 20% like commonly perceived with the 20% and 40% rates.

There's also some fuckery around the £120k mark, where basically you take home less as your salary goes up a bit. I forget the exact details, but you have to punch through to almost £150k for it to be worthwhile, or something.

Then there's salary sacrifice, which anyone earning over £50k should consider. Basically, you agree with your employer to reduce your salary, and the extra goes straight into your pension. When you do this with income above £50k, you avoid paying the 40% tax at that time. If when you retire your retirement income remains below the 40% tax bracket, then you'll never pay the 40%, only 20% when you withdraw your pension.