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Could you please clarify one case in respect of tax year 2010/2011. An employee receives his salary monthly. So from gross salary I will deduct 1/12 from Personal Allowance being GBP 539.58 and after will withhold 20% and transfer the amount of income tax to HMRC (PAYE). My question is when employer can obviously see that the employee’s income is more than 37400, should he continue charging him 20% or at the momemet he realises that income is higher the employer will start to withhold 40%? Thank you!
Employer should start to apply a rate of 40% as soon as employee’s total taxable income (less PA, benefits and reliefs) exceeds the lower band of 37.400.
That means, if in one month it exceeds the limit then he will apply both rates.
20% for the salary that is still within the band, and 40% for the excess.hope it answers ur question
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