Understanding your taxes
Tracey Emin decides to weigh in with an uninformed opinion
You can’t go a week without reading another story about the wealthy threatening to leave our shores because of something or another. ‘Taxes are too high!’ cry the bankers and glitterati. Tracey Emin has decided to join the whining droves, per BBC:
The government’s 50p tax rate for incomes of more than £150,000 will be introduced in April.
Emin said she is considering France because she thinks it has lower taxes and appreciates the arts more.
She said: “So much here is simply not working now. The taxes are too high, there aren’t enough incentives to work hard, and our politicians have put me off. We’re paying through the nose for everything.”
‘Importance of culture’
Referring to the new tax, she said: “I reckon it would mean me paying about 65p in every pound with tax, National Insurance and so on.“
Oops. Someone doesn’t understand how income tax in the UK works.
Income tax is not levied at a fixed rate. It is charged in bands. Your first £6,475 (current allowance) is not taxed. From £6,475 to £37,400 you’ll pay tax at a rate of 20% which means of the £30,925 you will pay £6,185 in tax. Above £37,400 you’ll pay at a rate of 40%. The proposed limit for the 50p tax band is £150,000. So, from £37,400 to £150,000 you’ll pay £45,040 on £112,600. Let’s say you earn £200,000, to create an example of what happens with tax, you’ll pay £25,000 tax on the £50,000 above £150,000. This means that out of £200,000 you’ll pay £76,225 in tax, or a total of 38.11% of your total income.
Now what about National Insurance? Well if you’re employed you won’t really have worried about it, because it all happens on the employer’s end. It’s probably just a figure you look at on your pay slip. Take a look at an explanation on Direct Gov. Tracey Emin is probably self-employed (being an artist) which means (and let’s use the £200,000 figure as an example), she will pay 8% national insurance on a sum between £5,715 and £43,875 (on taxable profit which we’re assuming is £200,000 heading her way) which works out as £3052.8. At 1% NI on the remainder of the taxable profits she’ll pay another £1561.25.
This all means a total bill on her side of £80,838.80 which translates to 40.42% (rounded up) of her yearly income going on tax. This presumes no exemptions or naughty ways of getting around taxable income that the wealthy with their clever and highly-paid accounts manage to employ.
So no Tracey, you’re not going to pay 65p on the pound on income tax and national insurance. You’ll pay about 40p overall. But thanks for weighing in on the topic.
If you think any of my figures are incorrect, please do get in contact and enlighten me.
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