If you barely made it into the 40% tax bracket, can you end up with less money than if you had a slightly lower wage because of the increase in tax?
Yes you can. It obviously depends on the numbers. Ya just have to do the math ;-)
No, you would still pay the standard rate of tax on anything up to the threshold, then pay the increased amount on anything above the threshold. So you don't end up paying 40% on all your earnings - only on the amount over the threshold. Last time I looked the threshold was ?33,300, so if this is the case then you would only pay 40% on anything above ?33,300 and I think that your personal tax allowance is then added to that as well. If your personal allowance (re tax code) was ?6000, then you add that to the ?33,300 giving you ?39,300 and only pay 40% on anything above that. I think that's how it works, but even if your personal allowance isn't added to it, you would still only pay the higher rate on amounts over the threshold.
In the U.S. (and I am guessing it is the same in the U.K), the tax brackets are marginal tax brackets. That means you only get taxed at the higher bracket on the income that is beyond the prior tax bracket. I don't know the brackets in the U.K. but lets say you make 105,000 and and the 40% bracket begins at $100,000. This means only $5,000 of your income is taxed at the 40% bracket. A complete example with made up brackets (I dont know the real information) 0 - 10,000: 0% 10,000 - 40,000: 15% 40,000 - 70,000: 25% 70,000 - 100,000: 35% 100,000+: 40% In this hypothetical example, someone that makes 105,00 would be taxed a total of 24,600 for an effective tax rate of 23.42% So to answer you question, it is not possible to end up with less money. However, any additional money you earn will be taxed at the 40% bracket. So your marginal tax rate is 40%. Your effective tax rate at 105,000 is 23.42%
