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Original poster

Tax brackets

110 replies

Vergus · 06/02/2025 11:22

AIBU or am I justified in thinking that the earnings difference is grossly unfair for people on the lower end of the 40% tax bracket - so those on £37,701 per annum (which is when you start paying 40% tax - up to £125,140 per annum.) Someone who earns on the lower end of this banding is paying exactly the same amount of tax as someone on £125,140. That's nuts! Surely they should stagger it more effectively, so that you don't have people on essentially a modest, average wage paying the same as higher earners? Or introduce the jump from 20% to 40% at a higher level, so around 60k per annum?

I just think the disparity in this strange standardised approach to two very different income levels must leave those who just earn enough to push them over the threshold very badly off indeed.

OP posts:
Original poster
Vergus · 06/02/2025 12:14

@MotionIntheOcean

A lot of the issue is fiscal drag. It's not kept up with inflation over the last few years, so a salary of 50k now buys what 33k did in 2010, but back then the 40% rate kicked in at 37.4k.

This was in my mind too although you have put it a lot more eloquently than I could. 50k doesn't go far nowadays

OP posts:
Spirallingdownwards · 06/02/2025 12:13

Vergus · 06/02/2025 12:05

@Spirallingdownwards

You assume wrong. I don't earn even 37k per annum. But thanks for your contribution!

It is quite usual for those type of comments to come up when people first tip over into that bracket. And also quite usual for the same people not to realise what happens at £100k.

MotionIntheOcean · 06/02/2025 12:10

A lot of the issue is fiscal drag. It's not kept up with inflation over the last few years, so a salary of 50k now buys what 33k did in 2010, but back then the 40% rate kicked in at 37.4k.

whatapalarva · 06/02/2025 12:10

sorry ill correct that, I meant anything over 100K - each £1 earned is taxed at 50%

Original poster
Vergus · 06/02/2025 12:07

@whatapalarva

but a simple salary sacrifice to your pension can reduce that taxable amount to below that threshold..

This is very good advice.

OP posts:
whatapalarva · 06/02/2025 12:05

I am fortunate that my earnings have increased over the years into the higher tax bracket 40% but a simple salary sacrifice to your pension can reduce that taxable amount to below that threshold.. similarly when getting close to the 110K+ which for each £1 earned over that anything over that would be taxed at 50%. I see it as a fair system but when you tip over into a higher tax bracket its not always worth the extra pay until your earnings get into the c55k range.

Original poster
Vergus · 06/02/2025 12:05

@Spirallingdownwards

You assume wrong. I don't earn even 37k per annum. But thanks for your contribution!

OP posts:
Spirallingdownwards · 06/02/2025 12:00

Enjoy your payrise which I assume has taken you into the 40% bracket.

Boohoo76 · 06/02/2025 11:58

Someone on £125k will pay approx £42k in income tax and £4.5k in NI. Someone on £50k will pay approx £7.4k in income tax and £2993 in NI. Why do you feel so hard done by OP? It’s the people on £100k plus who are paying the majority of the income tax in this country.

Cyclistmumgrandma · 06/02/2025 11:55

So I crunched the numbers. A person on £55000 per year pays 17.15% of their entire salary on tax. A person on £125000 pays 29.95% of their entire salary on tax because far more of their salary is taxed at the higher rate. That's before looking at the lower allowance on savings interest and other things.

MotionIntheOcean · 06/02/2025 11:55

I think the bigger issue is the cliff edges and bottlenecks that exist throughout the tax system, particularly the way they intersect with other things like nursery hours and UC.

TorroFerney · 06/02/2025 11:55

Vergus · 06/02/2025 11:31

It's a massive banding and the people at the bottom end of that are much more likely to feel the hit - obviously lifestyle choices and all that but still, it does a strange setup. Why not stagger the bandings more consistently so there's more of a relief for those at the lower end?

Why are you giving incorrect, lower figures?

rrrrrreatt · 06/02/2025 11:54

No one paying 40% tax is badly off except those living in central London. The average wage in the UK is £37k and 40% taxpayers earn at a minimum about 30%+ more than that.

I’m at the lower end of the 40% bracket and I’m happy to pay my taxes, I have more money than most have to get by even after deductions. It would always be nice to have even more but we need schools, housing, care for the vulnerable and sick, etc - that’s only possible if everyone contributes.

HellofromJohnCraven · 06/02/2025 11:53

I can't get het up tbh.
I earn just shy of £60k but some planning and paying into pension means that I rarely pay 40% tax. I think the fewer brackets the better.

Thistimearound · 06/02/2025 11:43

It’s not been 37k for ages has it?

And this misses the whole point, if you earn 51k you pay nothing on the first portion, then 20% on the majority and 40% on less than 1k. You barely pay 40%.

Someone on much higher doesn’t get the 0% amount at all and pays 40% or 45% on the majority.

nirishism · 06/02/2025 11:40

Well actually you start to lose your personal tax allowance at £100000 also.

You need to look at it as an effective rate overall, I think. So average out the rate of tax paid by an individual on their earnings altogether, across the personal allowance, the 20% band, the 40% band, the tapering of the personal allowance then the 45% band.

Those earning say £55k have a very different overall effective rate of tax than those earning £155k.

Overthebow · 06/02/2025 11:40

Well no, because those just over the £50k mark are paying 40% tax on a very small amount of their earnings. You pay 20% on everything over the personal limit to the £50k mark, then 40% for anything over that. At £100k you lose the personal allowance so you are actually comparing £50k up to £100k, not £125k.

Dishwashersaurous · 06/02/2025 11:40

It's a percentage, they are not paying the same.

However, there is a genuine conversation about what is the right amount of tax to pay on earned income.

HermioneWeasley · 06/02/2025 11:38

Are you proposing to reduce the overall tax take by making it (for example) 30% at £50,770 to £75k and then 40% after that, or are you suggesting even higher rates for higher earners? Because as one poster has pointed out it’s already 60% for £100-£125k and that’s created a number of issues with work just not being worth it in that bracket. At the highest rates, with NI, it’s 48% tax. How much of their earned money are people entitled to keep?

MyUmberSeal · 06/02/2025 11:38

VickyEadieofThigh · 06/02/2025 11:23

They're not paying the "same amount of tax" - the higher earner is paying a lot more, because they have a lot more taxable income. The person at the lower end of the higher tax bracket only pays the higher rate on their earnings above the higher rate threshold.

Exactly this!

SlipDigby · 06/02/2025 11:37

Agree with other posters. Also if you earn over £100k your personal allowance tapers by £1 for every £2 over.

Beenaboutabit · 06/02/2025 11:36

People on the lower end are more likely to have all there 40% back as tax relief on their pension contributions.

And I think their NI contributions drop from 8% to 2%.

Its not a terrible place to be

karmakameleon · 06/02/2025 11:36

Between 100k and 125k you pay 60% marginal tax rate (due to withdraw of the personal allowance).

eurochick · 06/02/2025 11:34

According to the gov.uk tax calculator on 37701 you would take home 30666.12. On 125140 you would take home 78114.20.

Clearly the sums paid in tax are vastly in different. Also the basic rate applies up to £50,270.

LIZS · 06/02/2025 11:34

They're not, as it is relative to earnings!