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

There are two tax cuts that research shows would pay for themselves. This is one of them. If you give everyone a personal allowance again, tax take would expand to pay for it and then some.

The other one is if they removed stamp duty on share sales.

We cannot do these tax cuts and enjoy the extra taxes that these cuts would raise as the general public (and a lot of Labour MPs) are simply too thick to realise that making these changes would raise more tax. They think tax cuts for ‘the wealthy’ and ‘finance’ are always a bad thing.

In a time where the PM governs by vibes and not intellect we’re stuck.

It’s bonkers. A family / single parent with one £100k earner and a student loan takes home £4,500/ month ish. Assuming South East where most of these salaries are, one child in nursery likely to be around £2,000/ month. Mortgage on a small 3 bed home also likely to be £2,000ish.
leaving £500 so obviously unworkable.
yes it sounds like a lot of money, but being unable to afford a mortgage on a small 3 bed home and 1 kid in nursery isn’t exactly the life of Riley

Link to back up: x.com/DanNeidle/status/2097967021279371341

Cliff edges are bad and should be got rid of. DH went down to 4 days a week for a while, partly because of it. That’s not good for tax receipts. We didn’t even have children in childcare - it’s much more incentivised for those who do. Raising the higher rate tax rate slightly would be fine, but cliff edges are stupid

It’s the Cliff edge Nature that’s unfair. There should be broader tapering to stop the all or nothing result rechildcare. It’s also insane to have a 62% marginal tax rate at exactly the same point as losing free childcare. We shouldn’t have any marginal tax rates over 50% at any income level. We need to get rid of disincentives To earning more!

It's only eroded away slowly as your pay rises over £100k, the loss of childcare seems a bit brutal, but I guess very few fall into the trap they just increase pension contributions to avoid it all.

Cliff edges like that at 100 and over are bad for everyone. The government loses tax revenue when people reduce their hours or turn down additional work to keep their earnings below £100k - which many do. It is the exact same principle when people reduce their hours because earning more would disproportionately reduce their benefits. i appreciate the the two groups in very different financial positions, but that isn't the point.

The point is that tax and benefits changes behaviour, and not necessarily in a way that is beneficial to the country. It's not rocket science, but a well designed system should encourage people to work and earn more, not create perverse financial "incentives" to do less than they could.

I don't agree with any cliff edge scenarios, or taxing over 50% morally. It's also discouraging people from earning and paying more taxes to the nation.

That said, the carers allowance cliff edge impacts the recipient far more, so should be the first priority for reform.

I agree. In general, I think there should be much more pragmatism and less ideology around benefits and how they are administered - which probably would mean more universal benefits.

I also think there should be broader tapering.

And- and this might be a separate point- I do also think there should be more state investment in high quality, heavily subsided childcare so no one is paying such extortionate childcare costs, and private nurseries are not being propped up by the tax system.

It doesn’t earn as much money if you take it away. If the government takes this cliff edge away the TAX TAKE INCREASES. It should do it immediately as a total no brainers. It could also increase the top rate of tax and the same time and people wouldn’t moan because the majority of people - and the government- would still be quids in.

And then start on the career cliff edge, and the child benefit cliff edge. Child benefit should be universal. It would be much simpler to manage and encourage people to earn more.

MPs salaries are very close to 100k, I wonder if there will be more incentive to change things once they are....?

Women worked long and hard not to be a financial appendage of their husbands and now you want to reverse it?

This, i went part time for years to avoid it but also then never went back full time even having gone through as it didnt feel worth it.

Cliff edge taxes like this are stupid. It really does incentivise people to not hit it especially those with children.

While it isn’t necessarily a bad thing for individuals to be stuffing their pensions, it can be that good for the economy as a whole because those individuals may well be going for very high pension contributions at the expense of paying for a cleaner for example or spending on meals out

At the lower end … increase the personal allowance but reintroduce the 10% rate.

I went part time for other reasons, but once you are part time not many people go back to full time if they can help it. This is one of the main issue with incentivising people to go part time. It reduces tax take in the long term, not just e.g. while you need to get under £100k for childcare reasons.

I agree re childcare. I think there should be:

• state/non profit nurseries from age 2
• a big program to encourage in home childminding for babies as its more important they have a single consistent caregiver.

I have long thought that if people could use state funded childcare hours to pay their own mum to care for their kids, a lot of the women who dont work in their 60s would suddenly become more economically productive in providing childcare for grandkids.

It is the exact same principle when people reduce their hours because earning more would disproportionately reduce their benefits.

You’re brave. The fires of hell descended on me when I said exactly the same thing a few months ago.

Basically this - and no - we have never earned more than £40k tops for either of our salaries.

The taxing of billionaires is the one that really needs looking at!

We did exactly this. When our mortgage went up, we reviewed finances. It wasnt tax efficient for me to go full time, we saved more by cutting having a cleaner and reducing our holiday budget.

Lame?

And when these high earners, the disparity between wealthy pensioners (which yes they’ve paid for and will be taxed on) and the ordinary Jane and Jack will be even wider than it seems today.

Also if all the essential workers like say medics who earn highly go part time and a load beetle off to Dubai or Australia or whatever it’s no surprise we have shortages in key areas. There’s a big ripple effect from these cliff edges and I’d prefer more equality, plus perhaps fewer ways to reduce tax through things like salary sacrifice schemes. Just make things fairer for everyone!

It’s not though is it. The person reducing their hours to avoid excessive tax - and I think we can all agree that the tax man taking 67% of your earnings is excessive - is still standing on their own two feet. The person reducing their hours to increase their benefits is doing so to get more from the state. They are takers, not givers.

Sure, it's unfair ... but on my mental tally of things that are unfair, illogical, undesirable, unjust and painful in the UK at the moment, it's pretty far down the list

I'll let you know if it's a problem when I get more than £100k a year. First world issue.