Liz Truss to raise income tax thresholds?

[GreenLunchBox]

There are rumours that she's going to increase the higher tax threshold to £80k. I think this is a good idea and will increase productivity. Sunak keeping the threshold frozen was a sneaky stealth tax. In this time of rampant inflation it's unfair for people to receive a small payrise and find themselves significantly paying more tax than before

It will also help with the rental property shortage as it will help to mitigate the unfavorable tax changes for landlords so less will be likely to sell up

Those “rich bastards” earning £50,271 and above? Get a grip. It’s not something that should be prioritised now but the idea people earning at that level are “rich bastards” who can be squeezed and squeezed is pathetic.

Poor logic there.

People aren’t reducing their hours to ensure they are under the next tax threshold, they just price certain hours of their time differently.

As an example, to earn your first 50k you would be willing to work a lot more hours than you would for your second, because that is time taken from your family life after you’ve covered all bills. It’s nothing to do with the level of tax and everything to do with how you value your personal time.

or another way to look at it…you might be willing to work 40hr weeks for 50k, but you wouldn’t work 80hr weeks for 100k.

Tax thresholds wouldn’t change the willingness of people to work extra by a great deal.

People are talking about promotion when they are already working full time. They don’t want to take on the extra work and responsibility as that leads to much more stress and a lot more time spent on work. I think it is reasonable to be keen to spend more time with your own family rather than paying more for other people to spend time with theirs.

I am keen to learn more about how commonplace the reluctance to be a higher rate taxpayer, while understanding that the higher rate is marginal, actually is. I always assumed people misunderstood the tax system but this thread clearly shows people who would reject an extra 5k because that 5k would be taxed at 40%. In good faith I'm really interested to learn more about this; are these edge cases? In my mind that means that you're not then interested in increasing salary beyond 55, to 60, then 65, 80, 90 etc - so I wonder if I'm being naive and this is quite commonplace in sectors where there is no/limited salary progression and if the top is just above the higher rate threshold, the work/life balance just becomes more important. Any insight?

I know plenty of people working in this bracket, and I don't know anyone who thinks like this.

I would support an increase in the personal allowance.

My BIL turned down a promotion because the cost vs benefit didn’t work out for him. He was already working stupid hours and he would have had to do more for what he considered to be a marginal improvement in finances, he has small kids and it wouldn’t have worked for them as a family, he could probably justify it if he was quite a bit better off. So it does happen

Probably all about lifestages. I am in a similar position and I just pay the extra into my pension and accept the longer hours. When I was younger, my children were small and pension years were a long way away I would have been less inclined.

People turn down promotion because of the cost v benefit all the way through, lower earners because of the minimum wage being higher so why be a supervisor if you only get 20p an hour more and at the £50k mark because of HRT and losing child benefit, you have to think, is promotion worth it at various thresholds.

I hope she does, it's wrong that so much of our income above 40k is wiped out by tax.

Whilst I don’t think now is the right time to raise this threshold I do think it needs looking at. I earn £49k (yes I must be one of those horrible rich bastards 🙄). If I tip into £50k then I get taxed that amount at 40% and also lose a proportion of tax free child benefit. The maths doesn’t add up to make any net benefit to me until you are earning over £55k. I’m happy to pay taxes but I’m not happy to earn hardly anything for the additional responsibility the payrise would mean. However I do think public services are in dire need of funding so at the moment not a priority. However those saying people should just work at just over £50k to pay tax are a bit purist and a bit up their own arse.

The threshold isn't 40k

But if you put the difference jn your pension, you get the better job, your tax and take home pay stay as they currently are (seeing as that obviously matters to you), you keep your child benefit, and your pension is boosted.

Why would someone not choose to do something that obviously benefits them in the long run? Is your pension pot so massive that it doesn't need the boost?

Pension deductions are a form of tax planning that the government actively want us to do, btw, that's why they are tax free (in this income bracket, anyway). It is better for the country in the long run if retired people can afford to survive.

Being a supervisor might only be 20p more, but I'm guessing it makes it a lot easier to progress to e.g. an assistant manager or manager role. Focusing on the immediate benefit only is an indicator of someone who takes a very short sighted approach.

The HRBC does act as a barrier to earning more but not so much the higher rate threshold on its own.

Many people just put the money into a pension scheme and increase the threshold barrier that way and enhance their savings for the future.

This is more understandable. If a job is going to require far more hours than you are prepared to give, it makes sense not to take it.

Why should people feel bad for earning a higher salary?!…I think it’s a good idea op

I wonder if you know how much it costs to live in the Home Counties?

Personally I'd be pleased as it would take me out of the 40% bracket altogether.

Also any overtime I worked wouldn't be taxed at 40% as it is now.

I can see why people wouldn't be pleased though.

I'm definitely not a Tory

@GreenLunchBox

Of course you're not .

I completely agree, so what if you pay more tax you are penalising yourself financially. Not going for one promotion then means you are missing out on the next one and so on.

I expect there will be a rise across all tax brackets - it is time the HR threshold moved a bit to reflect increases in earnings.

But I don't think it'll be as drastic as £80k unless she's a fool.

More likely back to £50k (where it's worth spectacularly less than it did in the 00s) and raising of personal allowance

Interesting graph about its movement over time

ifs.org.uk/taxlab/taxlab-data-item/higher-rate-threshold-over-time

I think so.

Spending on unnecessary environmentally-damaging and energy-guzzling goods and services, many with origins in or links to China and Russia and/or their economic allies.

So that’s nice.

Completely agree!

Going above the higher rate tax threshold - that has only increased by £8000 since 2002 - changes your entitlements and financial situation in other ways not 'just' 20% more tax on what you earn above that threshold. Remember high earners pay more tax overall even if the rate isn't sky high. The higher rate tax take is generally greater for the treasury with a lower higher rate than when it's sky high - because when it's at 98% (as it was in the 70s/80s the really rich move their assets off shore.

This anger at higher earners really irritates me - it's buying into the crappy divide and conquer, race to the bottom politics we've suffered for the last decade.

And - whilst they're decent salaries - people earning £50k - £100k are more comfortable but not rich by any means.

The other factor is that any income over £50k also starts to lose child benefit, including single parents, so how does the current setup encourage people to actually take the money and pay the tax rather than over pay into pensions? Something definitely needs to change as at the moment you’re penalising parents in the 50-60k bracket twice

It’s earning above the upper rate threshold that costs you money - so a pay rise to just above £100k (or whatever it is now) means you lose your tax free allowance and therefore yes, you earn less- you need to get a raise that takes you sufficiently over the threshold to counteract that loss. That’s the only situation where a raise isn’t net profit.