1

I'm concerned about my overtime I have done this month and would love to get some worries out of my head.

With bringing home around 1,300 for a basic month without over time, and overtime is paid at 11 an hour, with Sundays being double time.

I'm currently at 44 hours worth of overtime and the cut off period being 6th to the 6th. I'm due for atleast another 10 hours (being a Saturday at normal rate and a Sunday at double) taking the total to atleast 54 hours over time.

Could there be the potential to enter the higher tax bracket when it comes to the payslip including all this overtime?

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    Even if you are in the higher tax bracket, it is a marginal tax - you only pay the extra tax on the amount over the bracket boundary, not on all your pay. – Vicky Sep 1 '16 at 19:56
  • As well as the other answers, tax is assessed on a yearly basis. Doing 44hrs of overtime in one month is taxed the same as doing 4hrs of overtime each month over the year. – DJClayworth Sep 2 '16 at 14:50
  • (Restating what Vicky said.) As a general rule, you should be happy when you go into a higher tax bracket because that means you are making more money. It's really that simple. – TTT Sep 2 '16 at 16:06
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If you are bringing home £1300 a month then your annual gross earnings are approximately £19000 (making various assumptions about your status, eg that you are less than 60, not blind etc.)

If you add to that 54 hours of overtime at £11 / hour that is an extra £594 - even if you earned that every single month you would still be well under the higher rate tax bracket (£43000 in 2016/17).

Finally, even if you did push over into the 40% tax bracket, income tax is a marginal tax so you only pay 40% on the earnings above £43000, not on all your earnings.

3

There are two kinds of tax you will be subject to on your earnings: income tax and national insurance.

Income tax is charged with each payslip, but the brackets apply annually (April 6th - April 5th). So even if you end up being pushed into a higher tax bracket for some of your income this month - and as Vicky notes this is unlikely - unless you end up making more than £43000 gross over the entire tax year, the total income tax you pay over the course of the year will be at most 20%.

This is normally calculated by the PAYE system automatically. If you had some 20% bracket "spare" in previous months of this tax year, then you'll get that applied this month. If you still end up paying some 40% tax in this payslip, you'll get it back in a future payslip where you get charged less tax to compensate.

National insurance is applied weekly or monthly (depending on how often you get paid) rather than being added up over the course of the year. However, national insurance actually reduces for higher incomes. The "upper earnings limit" is aligned with the higher-rate income tax bracket, and if you end up in the higher-rate tax bracket for the month, the portion of your income in that bracket will only be subject to 2% National Insurance rather than 12%.

So overall, if you have a large "spike" this month that pushes you into the higher-rate tax bracket, you may pay 40% income tax and 2% NI on that portion of the income this month, rather than 20% income tax and 12% NI. But as long as your income doesn't exceed the higher-rate threshold for the tax year as a whole, you'll get back that extra 20% income tax later in the year, and you won't be charged the extra 10% NI.

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