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You might be surprised by what’s left of £100,000 after tax.
Of course, it’s still a handsome wage, but what many people don’t know is that when you start earning over £100k, you fall into a 60% tax trap. You gradually lose your tax-free Personal Allowance (which is £12,570 in the 2020/21 tax year). And until you earn £125,000 and lose it entirely, you’ll be paying tax at 60% on your income.
Look, it’s confusing, we know. We’ve written a guide about how it works so take a look to see an example of 60% tax in action.
You can calculate your earnings by using our Income Tax calculator. Just input a few details and we can calculate the tax you owe and the wage you’re left with after:
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As a self-employed you have to pay your income tax and national insurance contributions yourself during your annual self assessment. Our calculator helps you quickly assess how much payment is due.
However you may be eligible for a tax refund when:
In your case when you earn £49,000:
You pay no income tax on first £12,500 that you make
You pay £7,300 at basic income tax rate (20%) on the next £36,500
When you earn over £100k, you’ll be classed as a high earner. This means that you’ll need to do a tax return. HMRC will need to check that you’re being taxed the correct amount. To do this, they look at what’s known as your Adjusted Net Income. It’s basically another way of describing your total taxable income.
HMRC check whether you’re claiming any reliefs that reduce your taxable income, and whether you’re entitled to your Personal Allowance.
To do your tax return, you should first register for Self Assessment if you’ve not had to do it before.
If you owe any money, you should pay before 31st January in any given tax year.
Take a look at this step-by-step guide to help you with your first tax return.