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

So that’s what it costs now.. not what you paid?

What about people like GPs, who work part time to avoid falling into this? The country needs all the GP appointments it can generate!

The oldest one is still there - but, double the fun, I’ve got a second child there too!

So I paid the original sum, and the current sum - but now I pay it x2 too.

How are you funding that? Where are you finding the hundreds of billions of £?

And dentists too! Most now seem to work only 3/4 days. It's all definitely contributing to the ever longer waiting lists and difficulty accessing NHS services.

Same in other professions too - such as architects, accountants, solicitors, etc., where part time seems to now be the norm.

These are the kind of people we need to work more to generate income and grow the economy.

Dentists working part time has nothing to do with the shortage of NHS dentistry. Private work pays far better than an NHS contract, that’s why they’re working less than full time. Basic economics.

The pension relief remedy only applies to a relatively small slice of the pie though. It is worth doing for people whose income exceeds the cutoff by a small amount, but once the excess above the cutoff gets more significant it stops being worth doing so you stop bothering and just put in the amount of pension money that you actually need. The pension money will get taxed eventually and if you put so much into pension savings that you are still above the higher tax rate band after retirement, your pension will be taxed at that higher rate anyway. Wherever the cutoff is, there would be just as much complaining, so raising the threshold wouldn't actually solve anything and removing the threshold altogether means there's less help for the most vulnerable in order to benefit the wealthy and that's really not a good look.

The analogy of a "cliff edge" is flawed - you aren't getting pushed off a cliff edge - you are fine. You aren't worse off, you just aren't increasing the amount by which you are better-off as quickly as you would like. The correct analogy is instead of a "rescue platform" that is a level of affluence that means you are safe and out of danger. Anyone below that platform gets proportionate help depending on how far below they are, and anyone who has reached that platform simply is not a priority for help. The "pension relief" loophole creates a little breathing space for the people who have only just reached that platform so that they aren't immediately disadvantaged by going £1 above the threshold. People who are ambitious and capable might be happy to wait on the rescue platform (ie shovel their excess income into their pension) for a few years - perhaps just while their kids are in nursery - but will soon have the resilience and power to leave the platform behind and carry on climbing onwards and upwards without troubling the rescue services that are continuing to prioritise the people who haven't reached the platform yet.

I’m not sure it is the same if you consider the principle to have a moral dimension. One is a net contributor choosing not to contribute even more, one is a net beneficiary choosing to remain a net beneficiary.

Attitudes to this have changed over my lifetime. The community I grew up in expected those able to work and support themselves/families and it was socially unacceptable to do otherwise. It also expected to support those who could not work. In my memory that changed under Thatcher when wholesale abandoning of industry caused such widespread unemployment that life on benefits was normalised in much of the country.

We see threads on MN regularly where posters talk about jobs not being worth taking/expanding as they won’t be making much more than on benefits. Brown’s attempts to smooth the path into work also seem to have rebounded and become a subsidy for low paying business which exaggerates this effect. There will always be a boundary at which the gain is marginal in the short term. I think those posters are wrong and they should pay their own way if they can.

The 100k cliff edge is not the biggest and most important problem the country faces but it is an economic problem when the increasingly small cohort paying the bulk of the country’s bills are reducing their work hours due to the tax system. We lose a chunk of taxation and we also lose key business productivity. It makes no sense to tell some of the most economically productive workers to downsize their jobs.

@KindlySurfiingPlatypus

The analogy of a "cliff edge" is flawed - you aren't getting pushed off a cliff edge - you are fine. You aren't worse off, you just aren't increasing the amount by which you are better-off as quickly as you would like.

Nope, there are circumstances where it is genuinely a cliff edge where you ARE worse off. I.e. losing free childcare when your income increases to £100,001. Or if you're self employed, the effect of having to register and pay VAT when your gross turnover increases from £89,999 to £90,001. 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, and you have an expensive commute to pay for, etc. A marginal tax rate of 62% itself is insane. There should be an over-riding limit of 50% just as there should be a similar limit of not losing more than 50% at the lower end of the earnings scale where payroll deductions PLUS loss of benefits can mean your "net" (pay and benefits) reduces by more than 50% for earning an extra pound (and at some cases, again does make you worse off when all benefits are taken into account and all payroll deductions).

Well argued OP. Impressive.

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?

@C8H10N4O2

In my memory that changed under Thatcher when wholesale abandoning of industry caused such widespread unemployment that life on benefits was normalised in much of the country.

De-industrialisation was rife in the 60s and 70s before Thatcher. She gets blamed for a lot, but things weren't all sunshine and roses before her. More mines were closed before her than during her reign for example. Likewise the UK's rail was decimated in the 70s due to the collapse in freight traffic, partly due to the collapse of the mining industry, but also the collapse of lots of other industries. I'm old enough to remember the dark days of the 70s, the power cuts, 3 day weeks, thousands of job redundancies on the TV news every evening, IMF bailouts etc. We can blame Thatcher for lots of things, but the death of UK manufacturing industry can't be laid at her door.

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.

The government claim that it's just too difficult to make it fair and it's all about simplicity, but I'm skeptical.

That's a clear lie on their part, as it would be much simpler to just say £0-£X - no tax due; £X-£Y - basic rate tax due; £Y-£Z - higher rate tax due... then you could have higher tax bands if required, BUT only affecting the proportion of earnings that fall within that band and not affecting the earnings in the lower bands retrospectively.

I think any cliff edge for taxation is a bad idea, and the removal of the personal allowance makes the system overly complicated as well.

I would give everyone back their personal allowance but start the 45% additional rate at £100k, as well as making sure that the allowances keep up with wage inflation over time.

Regarding childcare, I think we start needing to see it as more of a public good rather than just a benefit for the parents. People staying in work and progressing their careers whilst their children are young are more likely to pay larger amounts of tax over their lifetime. I certainly agree that parents should contribute, so perhaps a percentage of income paid towards the 'free' hours over a certain income could help to address that.

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.

In my GP surgery every doctor works part time. I assume that's because of avoiding the tax trap. Yet we re short of GPs. I don't blame them. You spend your life sucking off the grubby tax man. If you are single and childfree its poor value for money.

But it’s the double whammy.

You lose your tax free amount and additionally lose your child benefit.

Government always squeezing the same people over and over and over again:

This may be a small component but by far the bigger factor is that “part time” GPs work 40 hours a week.

Nobody else signed up for you getting old did they?

Well, all of our parents did really, unless they were really unaware of basic science!

This would be fine if it was true that giving to the better off results in less money for the needy but in this you are totally wrong. Giving to the wealthy results in MORE MONEY FOR THE NEEDY.

Are you understanding this yet? Do I have to explain it again?

Maybe because disability isn’t a choice.

This would result in LOADS more money for public services and a much happier populace. So definitely won’t happen. 45% already starts at £75k in Scotland.

These measures - limiting childcare, removing personal allowance and child benefit etc were brought in as a sneaky way of raising more tax. Initially it did, but then people got wise to it, refused to work more to pay so much tax and the measures have resulted in less tax. Removing them would boost the government coffers but the optics would be bad. People just cannot understand that giving people who earn lots tax breaks increases the government tax take. So we’re stuck. Due to optics. It’s shit.