AIBU to think the £100k tax trap is unfair?

Thank you, I know exactly what PIP is for, I’m just not sure why it’s not means tested like other benefits. Yes, having a disability can lead to increased costs but children aren’t exactly free either? The view is taken that you earn enough to cover that cost so I can’t understand why it isn’t the same for PIP.

You choose where you live. I didn’t say businesses could claim VAT back on all their costs, I said they could set the VAT they pay out against it. Which means paying less VAT. I’ve noticed a tendency around here recently that challenging misinformation leads to being told you don’t understand. Unfortunately for purveyors of inaccuracy, I do understand and will continue to challenge those who attempt to pull the wool over others’ eyes.

The tax free allowance isn't a life jacket

And who exactly is the smug person sitting safely in the lifeboat? Why does that fringe group deserve your ire, but the person sitting in a lifeboat with their rent paid taking benefits when they could be working doesn't? What about the millions of people trying to earn more than minimum wage and improve their lives? Should they not bother, because you have made a moral judgement about what salary is enough?

One thing I never see discussed is the impact it has on households where one partner earns above the 100k and the other significantly below. I’d be inttrested on if anyone had any data regarding that.

My partner earns above 100k, we don’t qualify for any childcare (other than the universal hours over 3), no child benefit etc.

We live in an expensive part of north London (only sayung re mortgage costs) and have 2 children nursery age. I’m not complaning that we can’t access free childcare and know we’re in a privliged position.

However the high nursery costs in my area have made me consider leaving my lower paying ( significantly below 100k, nhs position) job. Because I earn less than the costs to send my 2 children to nursery.

With my husbands wage we can afford it, but from a personal standpoint I feel like I am paying to work and would rather be with my kids

No it's not unfair. These moany threads get started approximately once a week and it's not a good look. It's like people sitting snug on a boat insisting they have a right to keep their life jacket on because it makes them more comfortable when there are people in the water who have no boat and no jacket.

The "trap" you are referring to is simply the action of help being withdrawn that you simply don't need and only think you need because you think you are entitled to a more comfortable lifestyle than you can quite reach.

Yes there is a bit of a plateau in the rate at which your lifestyle comforts can increase when you are at that level. That is ok because you are at a level far above the level at which people are struggling. Metaphorically, it's like a platform that is located above the danger zone and all the help and rescue efforts are about helping people to reach that platform or get closer to it, and there's minimal help available for climbing up further. You are only struggling if you have managed your resources badly and taken on financial commitments that are too much for your income.

If your income is just above the "trap" level you can make extra pension contributions to keep below the trigger points.

If the amount by which your income exceeds the trigger points by too much for that to be viable then you are a wealthy person on every objective measure and are merely suffering from a mismatch between the even higher level of wealth you think you shoukd be entitled to vs actual reality.

It depends where you work, doesn’t it? You don’t have to work in London to be a high earner any more.

An expensive commute is only not optional if you earn enough to live closer to work.

I know. I was wrong about student loans. A commute may not be optional. An expensive one is.

I know. I was wrong about student loans. A commute may not be optional. An expensive one is.

Student loan repayments are not tax free. They are deducted after tax. (Unless this is a scheme difference.)

An expensive commute is not optional if you cannot afford to live next to your office.

The 62% marginal tax rate over £100k can also lead to being worse off if you're also liable for student loan repayments, workplace pension deductions

Workplace pension deductions are tax free so are student loan repayments, they reduce your tax liability. An expensive commute is optional. How does registering a business for VAT incur additional tax when it means you can set the VAT you pay out against it?

No it's not unfair. These moany threads get started approximately once a week and it's not a good look. It's like people sitting snug on a boat insisting they have a right to keep their life jacket on because it makes them more comfortable when there are people in the water who have no boat and no jacket.

The "trap" you are referring to is simply the action of help being withdrawn that you simply don't need and only think you need because you think you are entitled to a more comfortable lifestyle than you can quite reach.

Yes there is a bit of a plateau in the rate at which your lifestyle comforts can increase when you are at that level. That is ok because you are at a level far above the level at which people are struggling. Metaphorically, it's like a platform that is located above the danger zone and all the help and rescue efforts are about helping people to reach that platform or get closer to it, and there's minimal help available for climbing up further. You are only struggling if you have managed your resources badly and taken on financial commitments that are too much for your income.

If your income is just above the "trap" level you can make extra pension contributions to keep below the trigger points.

If the amount by which your income exceeds the trigger points by too much for that to be viable then you are a wealthy person on every objective measure and are merely suffering from a mismatch between the even higher level of wealth you think you shoukd be entitled to vs actual reality.

Student loan repayments don't reduce your tax liability. How can commuting to your workplace be optional if your employer requires you to be there. Compulsory workplace pension deductions are still deductions from your wages. VAT on ALL your turnover by definition has to be higher than VAT on your expenses assuming you're making a profit and anyway lots of expenses aren't VATable so very few businesses can claim VAT back on all their costs, i.e. staff wages, food (if a cafe/restaurant), insurance, etc are VAT free. If you don't know what you're talking about, it's best to keep quiet.

There's two issues at play here. One is it 'fair' on the individuals it affects and two is it fiscally sensible for the government. Personally I don't think it's fair or sensible as I've got a few friends in that bracket and they all work 4 days/put tonnes in their pension/don't go for promos to stay under the 100k. Ultimately earning 100-120k is completely pointless, you are better off earning 99k. Which for the vast majority of people is plenty to live on. Some people chose to take the hit as their career trajectory will take them way past £120k.

So if they tapered it, I think the government would end up with more money on the long run as people wouldn't stop trying before they hit 100k.

There is still limited incentive to only keep 38p in the pound of my salary, it makes more sense to keep under the threshold and retire early. I don't plan to stop the salary sacrifice unless the thresholds change.

Goodness!!

Yep I need to get on the housing ladder and the cash would be useful but now I am having to shove it in my pension instead which is no use today and may never be of use if I die before I can access it.

God thats awful

67.5% in Scotland. I got a bonus that helped towards by SEN child’s school fees but there was not much left after tax.

Massively unfair. It’s wild to me that a bonus I earn I have to hand more than 50% to the government income taxes. I think on a basic point of principle on no tranche of earned income should you ever have to hand more to the government than you get to keep.

Also the fact that the threshold has not been revisited is also ridiculous. (Same with other tax thresholds). Inflation and fiscal drag means tax rises without declaring them tax rises.

If the 100k threshold had moved in line with inflation it would now be the £160k threshold.

But the £100k tax trap is perfect for the government as comparatively few people earn over that so people generally have little sympathy with people earning that much being taxed so highly. It’s really not a huge risk for losing votes as most voters don’t earn that and have zero sympathy for those who do.

Child benefit and childcare subsidy should be universal.

ETA: stare pension should remain universal, not become means tested.