Commuting and the '40% tax bracket'

DonDaddyD

Cyclo-Commuting is expensive business, it could be argued as once mostly being a past time for the affluent and well off.

With such affluency comes high paying jobs and often management positions. These often mean greater taxes and rubbing shoulders with peers who are less forgiving.

So I ask,

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

When does the 40% tax bracket start, how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

asprilla

You only pay the additional tax on what you earn over the threshold. So, and my figures may be slightly out:

If you get paid £50k a year you are taxed:

£0-£4kish, nothing as this is personal allowance
£4kish-£36kish 22% tax (or whatever it is).
£36kish to £50kish 40% tax.

There is a 50% tax limit somewhere as well, I think.

No idea how NI works.

I have an accountant who works it all out for me.

No one has ever said anything to me about cycling, apart from drivers who read the Daily Mail and disagree on principle.

amnezia

DonDaddyD wrote:

How were you first looked upon as a person who cycled to work?

No differently to anyone else, there are people more senior to me that cycle in.

What did you do to overcome these objections?

there were none

When does the 40% tax bracket start, how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

no you only pay 40% on earnings above 37,400

tailwindhome

DDD wrote:

Commuting is expensive business,

I've often thought that it's only as expensive as you want it to be.

Thousands of 'working class' men (for it always seems to be men) commute to work by bike (BSO/ old racer) and for them it is a cheap option.

They're just not on here posting about it

amnezia wrote:

When does the 40% tax bracket start, how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

no you only pay 40% on earnings above 37,400

While this is true what also needs to be considered is that for every £1 earned above the threshold only 60p goes to the employee.

This may mean that the costs associated with working, such as additional childcare are greater than the additional earnings.

This is also true of low paying jobs

pintoo

I just do it. I am the only one in my office who rides. As a manager, I feel more able to set the tone than to comply with one set by higher-ups. Having said that, I've never cared much about fitting in if that means keeping up with the Joneses or pretending to be something I'm not. I'm not a fanatical cyclist; it's just part of who I am and how I get to work (and fit in some regular exercise). It doesn't define me any more than being a photo hobbyist or liking films and books.

If you don't feel comfortable being a cyclist, ask yourself why that is. If the reason doesn't have any weight, just do it.

Specialized Needs

DonDaddyD wrote:

Commuting is expensive business

Just commuting, or cycle commuting?

DonDaddyD wrote:

When does the 40% tax bracket start

Depends on a range of allowances for your personal circumstances,see here but be aware that the allowances get added to the amounts in the table at the bottom.

DonDaddyD wrote:

how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

Not due to the rate of tax** - that is differential (i.e. you are taxed at the higher rate on the amount that is over the threshold. Similarly, you do not get taxed at 'basic' rate on the personal allowance you have (probably the first £6,400 odd you earn) once you earn over that amount. More information here.

**IANAA but IIRC, NI is different, and it could lead to a slight drop as you pass a threshold. I could, however, be wrong/out of date.

Clever Pun

the 50% hits at 150k... I know one person affected by this, they retired and now consult at said company.. probably to the tune of 140ish. He works like a maniac and earns those pennies

Cycling to work doesn't affect you standing in a company unless your peers are all driven to work I would guess

jonginge

Asprilla wrote:

You only pay the additional tax on what you earn over the threshold. So, and my figures may be slightly out:

If you get paid £50k a year you are taxed:

£0-£4kish, nothing as this is personal allowance
£4kish-£36kish 22% tax (or whatever it is).
£36kish to £50kish 40% tax.

There is a 50% tax limit somewhere as well, I think.

No idea how NI works.

I have an accountant who works it all out for me.

No one has ever said anything to me about cycling, apart from drivers who read the Daily Mail and disagree on principle.

Not quite. The personal allowance effectively ups the bands so you actually only pay 40% on monies above 37,400+6,475=43,875

http://www.hmrc.gov.uk/rates/it.htm

rolf_f

Specialized Needs wrote:

**IANAA but IIRC, NI is different, and it could lead to a slight drop as you pass a threshold. I could, however, be wrong/out of date.

I forget the threshold but I think NI stops before you get to the 40% rate; it is anything other than a slight drop (more like 11 or 12 percent maybe?). Effectively, it means that those wealthy sorts who whine about the 40% rate are conveniently forgetting that they only really pay a few percent more than people much less well off than themselves.

Confused by the expensive bit though. Commuting by cycle has to be the cheapest way to commute by a long margin.

DonDaddyD

Just commuting, or cycle commuting?

Cyclo-Commuting. Original post to reflect this.

BiggerBoat

Most think I am a weirdy for cycle commuting, but being me (and the boss) I dont give a rats. As for taxes, I pay myself f-all salary and take the rest in dividends to avoid tax.

suzyb

I thought the government had cracked down on that.

rjsterry

DonDaddyD wrote:

Cyclo-Commuting is expensive business, it could be argued as once mostly being a past time for the affluent and well off.

With such affluency comes high paying jobs and often management positions. These often mean greater taxes and rubbing shoulders with peers who are less forgiving.

So I ask,

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

When does the 40% tax bracket start, how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

Well it can be, but doesn't have to be - we all have different definitions of 'have to' in that context, but if you don't have the money in the first place, it's quite easy not to spend it on shinybikethingswhichyoucouldmanagewithoutifyouwerehonest.

Never experienced any objections to my cycling at work. Bemusement or mild incredulity maybe, but nothing negative. At worst perhaps 'rather you than me, mate', so nothing o overcome really. I have a boss who is pro cycing (as in 'for' cycling, not a 'pro'), to the extent that when we moved into a new office a year or so ago, the refit of the office incorporated a shower, and in-office racks for eight bikes + an office track pump.

TheStone

The Tax and NI bands now match (they didn't a few years ago).

Also, they remove your tax allowance at 100k, so the effective tax rates (including
employers NI) for 2010-11 is something like this:

0 - 6,465 = 0%
6,465 - 43,875 = 31%
43,875 - 100,000 = 41%
100,000 - 112,000 = 61.5%
112,000 - 156,465 = 41%
156,465+ = 51%

But your employer pays another 12.8% on top of that directly to the govt (employers NI).

The effective tax rates are actually
0 - 6,465 = 0%
6,465 - 43,875 = 42.3%
43,875 - 100,000 = 52.3%
100,000 - 112,000 = 72.8%
112,000 - 156,465 = 52.3%
156,465+ = 62.3%
but you're paid 11.3% more than you think, which goes straight to the govt.

rjsterry

TheStone wrote:

The Tax and NI bands now match (they didn't a few years ago).

Also, they remove your tax allowance at 100k, so the effective tax rates (including
employers NI) for 2010-11 is something like this:

0 - 6,465 = 0%
6,465 - 43,875 = 31%
43,875 - 100,000 = 41%
100,000 - 112,000 = 61.5%
112,000 - 156,465 = 41%
156,465+ = 51%

But your employer pays another 12.8% on top of that directly to the govt (employers NI).

The effective tax rates are actually
0 - 6,465 = 0%
6,465 - 43,875 = 42.3%
43,875 - 100,000 = 52.3%
100,000 - 112,000 = 72.8%
112,000 - 156,465 = 52.3%
156,465+ = 62.3%
but you're paid 11.3% more than you think, which goes straight to the govt.

Well, it costs your employer more to employ you than you think, but you aren't paid that extra money in any sense. Hence the Tories referring to it as a jobs tax during the election - not altogether untrue, but then it always was.

Interesting that the rates fluctuate above £100K. Anyone know what the rationale is for this?

lost_in_thought

After 112k, you lose your tax-free allowance altogether, so you're paying tax on every £ you earn. Dunno if that's got anything to do with the rates fluctuation, but it sure is mean.

Agent57

DonDaddyD wrote:

Cyclo-Commuting is expensive business

Huh? I commute on a 20-year-old bike, and commuting by bike costs me next to nothing compared to fuel costs & running a car.

DonDaddyD wrote:

it could be argued as once mostly being a past time for the affluent and well off.

I'm not sure I get the transition here. Commuting by bike isn't a pass-time as such, it's commuting. If you mean general leisure riding, I don't agree that riding a bike is mostly for the affluent or well-off.

DonDaddyD wrote:

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

I think I was looked upon just as another guy in the office. If there were any objections, my colleagues have always kept them to themselves.

lost_in_thought

DonDaddyD wrote:

Cyclo-Commuting is expensive business, it could be argued as once mostly being a past time for the affluent and well off.

With such affluency comes high paying jobs and often management positions. These often mean greater taxes and rubbing shoulders with peers who are less forgiving.

Rubbish. It's as expensive as you make it. People on here (as a rule) tend to make it rather expensive. What's more, people who earn more are certainly not all barstewards. Inverse snobbery much?

DonDaddyD wrote:

So I ask,

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

There were no objections, it's always been seen as admirable.

daviesee

TheStone wrote:

The Tax and NI bands now match (they didn't a few years ago).

Also, they remove your tax allowance at 100k, so the effective tax rates (including
employers NI) for 2010-11 is something like this:

0 - 6,465 = 0%
6,465 - 43,875 = 31%
43,875 - 100,000 = 41%
100,000 - 112,000 = 61.5%
112,000 - 156,465 = 41%
156,465+ = 51%

But your employer pays another 12.8% on top of that directly to the govt (employers NI).

The effective tax rates are actually
0 - 6,465 = 0%
6,465 - 43,875 = 42.3%
43,875 - 100,000 = 52.3%
100,000 - 112,000 = 72.8%
112,000 - 156,465 = 52.3%
156,465+ = 62.3%
but you're paid 11.3% more than you think, which goes straight to the govt.

If these figures are true, i will have to make sure i stay below £100k, or above £112k (Not gonna happen :evil: )

Explains why accountants do so well though :!:

Mickey Eye

Don't really care about responding to the rest of the op but commuting by bicycle used to be quite common for industrial workers, miners, ship builders etc. I'm aware that the tweed runner types and those that look to the past for a little extra class tend to be unaware of this but while there were cycling clubs for the rich it certainly wasn't an exclusive form of transport.

Headhuunter

DonDaddyD wrote:

Cyclo-Commuting is expensive business, it could be argued as once mostly being a past time for the affluent and well off.

With such affluency comes high paying jobs and often management positions. These often mean greater taxes and rubbing shoulders with peers who are less forgiving.

So I ask,

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

When does the 40% tax bracket start, how does it work does it mean a person earning just above the threshold could earn less than a person just below it?

I disagree that cyclo commuting is expensive. It can be if you want it to be, but you don't have to buy fancy cycling gear if all you're doing is riding to work and back.

I have Decathlon padded lycra shorts (about £6 a pair I think), cheap cotton T shirts and sleeveless tops (between a couple of quid and a fiver each), cycling over shorts (relatively expensive at about £20 ish each pair). Gloves (between £2 from LIDL and £6-7 for Specialized BG gloves in the sale). Commuting bikes were 2nd hand up to around £100, new Ribble bike (waiting for delivery) on bike to work scheme (full price £570), rucksack (about £20 from Decathlon), inner tubes (£2-5 a pair from Decathlon) etc etc.

Of course these things cost a bit up front but most of them once bought you don't need to buy again for quite a while. If you want all the fancy branded bike stuff then fine, but it's completely unecessary.

Cycling to work is way, waaaaay cheaper than buying a zone 1-2 travelcard and cramming onto the Tube/train/bus

Everyone in our office is a 40% taxpayer and some may even tip into 50%. Since we joined the bike 2 work scheme more and more people cycle, there are about 6 of us now. Puts pressure on the single shower room downstairs sometimes!

asprilla

Considering my monthly travel card was north of £250 I'm finding cycle commuting to be quite cheap.

TheStone

rjsterry wrote:

Well, it costs your employer more to employ you than you think, but you aren't paid that extra money in any sense. Hence the Tories referring to it as a jobs tax during the election - not altogether untrue, but then it always was.

Interesting that the rates fluctuate above £100K. Anyone know what the rationale is for this?

But you would be paid it if it wasn't tax.
Employer has X to spend on staff, govt want Y up front as tax, employee gets X-Y.

The fluctuation above 100k is the removal of the allowance. Very strange way to do it.

Stevo_666

DonDaddyD wrote:

So I ask,

How were you first looked upon as a person who cycled to work?

What did you do to overcome these objections?

It probably depends on the culture and type of organisation but tbh I've never had a problem with how anyone else sees it, in fact I have told most people I am commuting by bike. It could be that our office is small - about 45 people - and everyone knows each other. The fact that the group finance director occasionally bikes it in probably helps as well.

rjsterry

TheStone wrote:

But you would be paid it if it wasn't tax.
Employer has X to spend on staff, govt want Y up front as tax, employee gets X-Y.

Yes, but I'm not sure that would happen in reality. If employers contributions disappeared, I think most employers would keep at least some of the money themselves. In time, they might reinvest some of that saving in pay rises, but at the moment I doubt it.

Stevo_666

TheStone wrote:

rjsterry wrote:

Well, it costs your employer more to employ you than you think, but you aren't paid that extra money in any sense. Hence the Tories referring to it as a jobs tax during the election - not altogether untrue, but then it always was.

Interesting that the rates fluctuate above £100K. Anyone know what the rationale is for this?

But you would be paid it if it wasn't tax.
Employer has X to spend on staff, govt want Y up front as tax, employee gets X-Y.

The fluctuation above 100k is the removal of the allowance. Very strange way to do it.

The NI is not simple but the bit you are debating here is the employers NI (which is a liability of the company that employs you), as opposed to the employees NI which comes off your gross pay in the same way as income tax does and is your liability as an employee - the company just pays it on your behalf to HMRC. I doubt that if the employers NI did not apply they would pay you more though

THe removal of the allowance is odd as it means that between about £100k-£112k the marginal rate of tax is very high - an employee loses £1 of their personal allowance for every £2 earned over £100k until the personal allowance is effectively zero around £112k pa. It was probably seen as a way of getting more out of higher paid employees without raising the top rate even further or have it cut in earlier - which probably would look worse.

DonDaddyD

Challenge the taboo and they all come out screaming.

My bike costs £350. This has always been cheap to me. Many of my friends and peers both middle class and other have often commented on its expense. The expense of repairing it and replacing parts and the expense of accessories. I told Mrs DDD that I bought some cheap mitts for £25 she gawked. Needless to say I don't apply a cheap or expensive notion to her shoes.

Of course the justification behind what is expensive and what isn't is subjective and determined by what an individual places value. So I'm not going to argue this any further than having spoken to some who earn less than £17,000per year, to them cycling appears to expensive.

Olivia,

How are those high heels and did that girl ever get work after being made redundant due to her weight? Is she ok, not mentally wounded, developed an eating disorder or anything, no?

Live the World through my eyes and you may find an experience where senior bosses/peers etc are less forgiving. I've been met with both wonderful opportunity and great prejudice. You're right not all are c*nts but some are or have been and haven't even realised it.

suzyb

Mickey Eye wrote:

Don't really care about responding to the rest of the op but commuting by bicycle used to be quite common for industrial workers, miners, ship builders etc. I'm aware that the tweed runner types and those that look to the past for a little extra class tend to be unaware of this but while there were cycling clubs for the rich it certainly wasn't an exclusive form of transport.

That's what I still find.

Although there aren't really that many cycle commuters around here those there are do seem to be manual workers or the less well off (usually riding old BSOs with badly adjusted gears).

wgwarburton

Stevo 666 wrote:

...THe removal of the allowance is odd as it means that between about £100k-£112k the marginal rate of tax is very high - an employee loses £1 of their eprsonal allowance for every £2 earned over £100k until the personal allowance is effectively zero around £112k pa. It was probably seen as a way of getting more out of higher paid employees without raising the toip rate even further or have it cut in earlier - which probably would look worse.

It's all ridiculously complicated- the bands, rates and distribution of where the costs fall (employer vs employee) have all been tweaked by successive govenments to achieve particular goals (or headlines, perhaps). Recall the furore recently when labour tried to tweak the bottom end of the system (10% band) and miscalculated the financial impact & political fallout!
The dividends vs income split referred to earlier is another example of attempted tweaking at the margins- the idea was to close a "loophole" that let people avoid tax if they operated as a business. It's caused a huge amount of stress and confusion without raising any useful amount of money, according to many reports. Similarly, there was a move to stop people shifting income to their partners in order to reduce their tax bills that was challenged in the courts and cost a lot of money.

Successive governments claim they will simplify the tax system, but the temptation to tweak it to political ends is strong.

Cheers,
W.

tailwindhome

DonDaddyD wrote:

Challenge the taboo and they all come out screaming.

No one is screaming

They/we are disagreeing with your original post that cycling is expensive

It isn't/ doesn't have to be

DonDaddyD

Any BSO commuters I've know, who have bought the bike because they couldn't afford a better one don't tend to be cycle-commuters for long unless there is no realistic alternative of getting to work. In London that is a rare case.

They only tend to commute for as long as the bike lasts, which isn't long - one winter (thank god I've got Karen) or until their enthusiasm ends, which usually is at the foot of any hill due to the bikes incalcualble weight and number of dead spots in the pedal rotation.

As for the 40% tax bracket: You only get taxed on earnings above the stated amount. Thanks.