50% tax rate - unexpected consequence

[MollieO]

Ds not well so we ended up at the OOH service this afternoon. As it happens we saw our usual GP - knew that he did Saturdays OOH but didn't realise he also did alternate Sundays. He said he won't be doing them for much longer because of the 50% tax rate and associated loss of the basic rate personal allowance. Apparently 16 out of the 20 GPs who cover OOHs are also quitting. This is because doing OOH work puts them just into the 50% bracket but because of the tax effect sees them actually being paid nett very little for the work they do.

It means that we will lose an excellent local facility and see it replaced with locums (at least I assume that is what will happen at best, at worst the facility will be reduced). Unlike the current GPs the locums will have no connection with the existing GPs surgeries and I can only see that as a bad thing.

I'm not against the 50% rate (never likely to affect me) and had assumed it is only the 'very rich' who are affected. However the impact of its introduction will perhaps have a far wider effect than we like to think.

[vesela]

Interesting.

I was never in favour of it, and was glad when the Lib Dems voted to drop it.

[jackstarbright]

I think you GP is caught in marginal 65%(?) tax rate which hits people as they lose their personal allowance.

Another issue is that these tax increases might lead to an overall decrease in tax take - not great given our deficit.

[MollieO]

Don't know the exact detail, only what he said (we were in there about 30 mins!). I was really surprised tbh as I assumed, wrongly, it only affected bankers and other people I have little interest in .

[Quattrocento]

The 50% tax rate was a populist measure, and the government knew fine well that it would:

1. Operate as a disincentive - as here, where people stop working or move abroad
2. Reduce tax take from other taxes as people earn less so spend less
3. Raise far less revenue than they think it will

Here's what the IFS thinks

[ASecretLemonadeDrinkerDAVE]

Do we have a 50% rate? What is it? I thought it was 0%, 20/22% then 40% (for 32k +?)

[MollieO]

It started last month.

[Cartoose]

50% tax rate is for 150000 and above

[ASecretLemonadeDrinkerDAVE]

Thing is, won't their income go back into the economy anyway buy spending in shops, wages for staff/childcare etc. Doesn't seem worth working your arse off for getting 50p in a £ and I'd imagine it would do more harm than good as business growth (if you were self employed or something) would be capped as they won't bother to have an income too high, whereas if their business grew they would probably employ more staff.

[MollieO]

The erosion of tax and removal of the basic rate allowance starts at £100,000.

[catinthehat2]

"By jackstarbright Sun 09-May-10 22:13:01
I think you GP is caught in marginal 65%(?) tax rate which hits people as they lose their personal allowance"

I bet this is it - not just 50%, but the rest as well. Can't say I would be turning out on a Sunday night for 35p in the £ either.

[TheHeathenOfSuburbia]

Sorry, what happens with the 50% tax rate and personal allowance?

I take it there is something different from when you go over 32k and earnings from then are taxed at 40%?

[jackstarbright]

Mollie - I think once someone earns £100k their personal allowance is phased out. Which in effect means the marginal rate of tax is more than 50% (60ish%) At £150k you hit the 50% tax level. Your GP could be at either threshold I guess. At the time I remember hearing that this wld effect GP's and solicitors working overtime.

Also this year the early retirement law changed - so I wouldn't be surprised if this tax increase didn't encourage some higher tax payers into early retirement.

This is why I think it unlikely that Labour would have increased higher rate income tax until they were very sure it wouldn't decrease tax revenue. Although I know plenty of Labour supporters assumed they would do it to avoid spending cuts!

[MollieO]

The amount of work he does - own GP practice, paediatric registrar at local hospital, OOH he is probably nearer the £150,000 level (and imo deserves every penny). He said that a lot of the other more junior (although still experienced GPs) are on £98,000ish and these are the ones who are also most affected.

I've been a bit sideswiped by this tbh as I really didn't imagine that a 50% tax rate could impact on me so directly.

[MollieO]

Our OOH has been the same for years, well before the salary hike of the last 2 or 3 years. Don't know how that impacted take home pay but it certainly didn't change the level of service we get.

[Cazwa]

Sorry but anyone earning over 150k a year deserves to be giving back some to the less equal in society. If they arent prepared to work when charged that amount then fine, give it to others who are willing to work. Got no sympathy for tax-shirkers who earn a fortune.

[MollieO]

Well I wouldn't give up my Sunday at home with the family for 35p in every £1 when I didn't have to. That is the key - no one makes them work the OOH service, it is their choice. However it is a better service because they choose to do it.

I would prefer to see an OOH GP who has some connection with our local area too. If we don't see a GP from our surgery we usually see a GP from another surgery we know (ds has been a frequent user of OOH since birth unfortunately). I am sure there a good locums but do they have the same interest as someone who is that community every day, rather than just coming for the weekend/day etc and maybe never doing another shift for that PCT again?

[MollieO]

'there are good locums' and 'someone who is in that community'. Too tired to type coherently it seems!

[gaelicsheep]

There's a clear solution to that. Get them to do OOH for their existing inflated salary with no extra payment. As a condition of employment.

[londonmackem]

Cazwa,
Your views are fine except that I would much rather see a doctor that I know and trust than a locum. I don't think £100 or £150,000 is excessive for someone who has studied for 7 years and potentially saves lives. If they earned well over the threshold then fair enough but you can't blame them for choosing not to miss out on time with their own families for very little extra money!
The worrying thing about doctors who 'are prepared to work' is that they are often doctors who are locums and doing this kind of work on top of normal days and unfortunately "tiredness can kill". I am sure this is very rare but does happen and I am by no means scare mongering but I believe in fair money for services provided. My doctor is worth more than £150,000 without doing extra hours as the service she provides is really priceless (I am aware that not all GPs are great!).

[jackstarbright]

Tis the irony about 'taxing the rich' you kinda need to them to agree and go along with it. Some will and some won't! And the richer they are the more flexiblity they have to change their lifestyle and pay less tax.

Slippery b**gers - rich people!

[MollieO]

gaelic not sure what that would solve. No idea if you work but if you do how would you feel to be told that you have to do an extra 15-20 hours a week for no extra money? You may choose to do so or you may choose to go somewhere else that pays more for less hours.

Not all doctors are worth their money. Not all do the amount of work that puts them into £100,000 plus bracket. However some do and some, like my GP are excellent. I would much rather pay his salary than that of the PCT managers who have overspent their budget by £100million and are looking to cut areas like paediatric oncology as a result

[gaelicsheep]

I do, and in the past have routinely done 8 or 10 hours extra a week for no extra money just to get the job done. I think the current pay deal which also allows them to opt out of OOH care is ridiculous.

[fembear]

This situation has come about because of the incompetent deal that Labour did a few years back on GPs' contracts where they ended up paying the doctors more money to do less work. link