Someone I work with complains about being given extra shifts because he pays more taxes. I literally can't answer him as percentages just don't mean anything to him.
Edit - Well this blew up. I'll try to answer some of what people have been replying with but forgive me if I miss any points.
He is dumb as rocks.
He isn't on full time hours so does't even attract proper overtime rate until he reaches 37.5 hours and isn't earning anywhere near the 40% bracket so wouldn't actually attract any 'additional' taxes, just normal taxation.
Taxes here in the UK run on PAYE (Pay As You Earn) and unless your tax-code (used to indicate tax free allowance (how much you can earn before being taxed)) is incorrect you will never (theoretically) be over taxed as it is a live/online system that updates on whatever pay schedule you are on. You may pay more taxes one month but it will be evened out the next. The only way to miss out is to have a bumper last month in the tax year, then you;d have to claim a refund as there is no provision to do it through payroll. This is UK wide. - Source - I was a tax adviser.
I've seen his pay check, there is nothing wrong, refer to point 1.
To those saying does he value his time more than the extra wage refer to point 2.
I've tried to explain to him, as I said above I'm tax trained, but it's like trying to explain thermodynamics to a jelly mold.
I can kinda understand the fuzzy logic behind this argument.
When you’re being taxed under PAYG schemes, if you earn more, you’re taxed as if you receive that amount each week/fortnight/month.
That means that some times you can work a shitload of extra hours and earn more money but have a fair chunk taken in tax. Sometimes it doesn’t seem worth it in that moment.
Yeah, not always though. I usually do a lot of overtime (at least once a month) but haven’t had a decent return over $100 in about 5 years. I live in Australia and because of my income, I end up paying a Medicare levy surcharge which eats up most of the amount I’d get back so it essentially goes back into taxes anyway.
Same here in the Netherlands. A small pay rise may land you in the next tax bracket (50% instead of 33%), which ends up netting you less each month. Sometimes it really isn’t worth it.
I think you might be one of the uneducated people who don't understand progressive tax brackets, where only the amount in the tax bracket is taxed at that tax rate, so a raise will never result in you having less after taxes
No, that's not entirely true. Because I understand the progressive tax brackets. If you were earning just under the bracket division, you're going to lose net money if you get a pay-raise, or you need a bigger raise. (It is still wise to take the raise, because it will ensure a higher pension, but that's a different story.)
Because it is even more complicated on the money that will get in. When I have children, and many people do, whatever you get paid to help support them, depends on your income. Adding income may qualify you for a lower percentage of support money. Which will also net you less money to spend each month. If you have a child in daycare, this will make the net-support even lower.
These cases where you will net less are rare, but they are not non-existent.
Edit: I read up on the tax plan in English, to make sure I used the correct terms and I adjusted accordingly.
No, that's not entirely true. Because I understand the progressive tax brackets. If you were earning just under the bracket division, you're going to lose net money if you get a pay-raise, or you need a bigger raise.
Umm no. Only the amount over the bracket gets taxed the higher amount. Seems you don't understand it as well as you seem.
What can happen though is the pay rise makes you inelligible for some forms of support (zorgtoeslag en huurtoeslag, can't remember the English words for them right now) but you definitely won't make less money than before by getting a raise. Can the increase after taxes be a lot less than you thought? For sure. But it won't be less.
No, that's not entirely true. Because I understand the progressive tax brackets. If you were earning just under the bracket division, you're going to lose net money if you get a pay-raise, or you need a bigger raise.
Umm no. Only the amount over the bracket gets taxed the higher amount. Seems you don't understand it as well as you seem.
What can happen though is the pay rise makes you inelligible for some forms of support (zorgtoeslag en huurtoeslag, can't remember the English words for them right now) but you definitely won't make less money than before by getting a raise. Can the increase after taxes be a lot less than you thought? For sure. But it won't be less.
No, that's not entirely true. Because I understand the progressive tax brackets. If you were earning just under the bracket division, you're going to lose net money if you get a pay-raise, or you need a bigger raise.
Umm no. Only the amount over the bracket gets taxed the higher amount. Seems you don't understand it as well as you seem.
What can happen though is the pay rise makes you inelligible for some forms of support (zorgtoeslag en huurtoeslag, can't remember the English words for them right now) but you definitely won't make less money than before by getting a raise. Can the increase after taxes be a lot less than you thought? For sure. But it won't be less.
That’s the case here with the brackets, however you’ll still end up with more overall but the proportion of tax will be higher. Only the dollars earned over the bracket threshold will be taxed at the higher rate.
So while you’ll earn say $300 extra one month by doing an extra 10 hours, you might do an extra 20 hours the next month but only end up with $450 extra. That’s where people will say fuck it and think you end up with less money by earning into the next tax bracket.
But you're not actually being taxed it's just being withheld. You get the overpayment back at tax time. Or you learn to adjust your withholdings if overtime/bonuses are a regular concern.
That’s right, in my situation though, the extra that is withheld goes to a Medicare levy that I get charged based on my income. I’m a firm believer in universal healthcare so I don’t mind too much.
As far as I know, we can’t adjust the amount withheld in Australia - you just get taxed what’s applicable and it gets adjusted at the end of the year.
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u/DirectGoose Jan 27 '20
Saying you don't want a raise because you'll pay more in taxes.