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

Absolutely, he prioritises family time with his kids. I imagine if he didn’t have any or they had left home he may have considered it. But it’s not worth the extra hassle for what ends up being a few extra quid a month if they are doing ok.

More than half of households are net recipients of state money. It is easy to lecture others on having a social conscience, if you don’t have to pay for it. Apart from the odd Lady Bountiful types, most higher rate tax payers, that I know, accept that they need to contribute more but don’t totally rejoice in it.

I'd choose to raise threshold at other end, as it'd benefit everyone paying tax. It'd give people really struggling a bit more to pay the bills, buy the odd extra item. Those that are better off will have the extra for the same reasons or giving them them more choice on individual items as they can afford more.

I think it’s a much needed good idea if done hand in hand with a tax rise for the ultra high earners eg over £150k or £200k. Probably doesn’t need to be as generous as £80k though.

My guess is that earners around the higher tax rate threshold have experienced one of the greatest losses of earning power over the past few years due to freezing of tax thresholds, wage freezes and child benefit clawback.
Since I read recently that for a basic standard of living the joint income required (including any benefits) for a family with 2 children is £47k, £50/£55k no longer has the buying power it used to, it makes sense to me to push the tax burden up the chain to those who are truly wealthy.

The threshold isn't 40k

Its around £43,000 in Scotland. I work part time and run a business, the higher tax threshold does inform how much work I take on because over that threshold I lose 40% of my hourly fee to tax. If I were in full time employment I’d take a promotion because at my level a promotion wouldn’t increase my working hours so I’d gain 60% of any raise without affecting my work/life balance.

A raise in the higher tax threshold supports folk in self employment who would see a significant increase in income in exchange for working longer hours on their business. As it stands it’s not worth me working more hours for 60% of my fee, I’m at the stage where I’d rather have the time.

@Wearefoooked22 Its not meant to make higher wage earners “ feel bad”.It’s called progressive taxing. Effectively money is worth less the more you earn ie not worth Bill Gates picking up £50 because he earns more than the time ie it takes. So at £50,000 a £10 is a cheap bottle of wine but at £12,000 it’s the difference between kids having shoes or not.

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
One of the reasons for a rental shortage is that people can’t get onto the market with all the buy to let mortgages and property investors. Monthly payments are less on mortgages then rent. Hopefully landlords will sell up so affordable housing becomes available as homes not property portfolios.

I like this idea, the higher rate is currently far too low and harms many hard working middle class people.

I hope they also increase the IHT rate that has been at £325k since 2009.

“ harms”?

Rising productivity, isn't about getting people to work harder, UK workers already work longer hours than workers in most other european countries and increasing higher TH would make zero difference.

Increased productivity comes from more investment in equipment, skills and efficiency.

Anyway, the country has borrowed far beyond its means to pay for these sorts on investments.

That's not correct.

If I earn 101k I lost one 1k of my tax allowance, so I pay 20 percent tax on that 1k = 200 pounds. I also pay 40 percent on the additional 1k I've earned so 400 pounds.

So for my additional 1k I 'only' take home £400. (Less 1.25 percent NI). But I still take home more than I would if I earned 100k and so DO make a net profit.

The UK’s “productivity puzzle”. Worth thinking about. There isn’t likely to be a single solution but we do need to find solutions or long term it could be very bad news.
www.taxjournal.com/articles/taxation-productivity-and-growth

Interesting to see what happens in Scotland if this move goes ahead. I already pay higher rate tax 7k earlier than colleagues based in England. Can Scottish Government hold out on a similar move when people can see the failing standards in this country and already wonder where their tax is going?.

I thought this must have been a parody post but clearly not.

The sector of society that most needs tax cuts is not the sector that these cuts are benefitting.

Tax cuts to the rich to increase productivity is a macroeconomic fallacy.

Plus public services are on their knees already. What part of the public purse exactly is paying for them?

£80k gross a year isn't rich. It's comfortable, above average but it's not rich.

I didn't think I'd have time relive the 80s again politically but here we are :(
I just hope they all know what they are doing

Dh earns £55k, I earn a pittance and barely enough to cover nursery fees, after childcare costs I don't have enough to contribute towards anything else in the house. So everything comes out of DHs salary, which might sound decent but when it's covering an entire household, is taxed highly and stops me from being entitled to anything even child benefit I'd have to save and sort tax returns for and it just isn't worth doing. He gets a bonus every year which really just helps even us out and get us out of credit cards that we had to rely on through the year and he'll get about half of it. The bonuses are only £6k so after tax when he barely has £3k its really shit especially considering how hard he works. Of course a lot of people have it worse and I don't deny that, but not all households have two good incomes coming in and a salary of around £50k really isn't that high when covering an entire family.

A salary of 50k is quite high and given you also have some income it probably puts you in the top 20%

Can we have a munsnet definition of rich

The top 30%? 10% ? 1%?

So everything comes out of DHs salary,

Everything comes out of household income, childcare isn’t a woman’s cost alone - you do contribute to the household costs. While on paper it looks the same (ie your salary more or less equates to nursery fees), the mindset of I cover childcare and don’t contribute beyond that is quite damaging and can lead to women taking themselves out of the job market because it isn’t worth it.

I'm just saying if the plan with raising the threshold is to put money back into the hands of the people and in turn grow the economy it's not entirely wrong. Again I'm not speaking for those worse off, but speaking of my situation if the threshold was increased to £80k and we were no longer in that higher bracket it would give us breathing room and the money that is currently going to be absorbed by higher energy bills and mortgage rates would stay disposable meaning we would be spending this in the economy. We aren't hard done by but the first thing that'll go over the next couple of years is unessential spending, a lot of mid earners like us (combined salary, I'm definitely not a mid earner alone) will do the same. It will have a knock on effect on the economy. We aren't rich and flying off on luxury holidays and eating caviar like saying "top 20%" implies. We're a normal family, with a mortgage and debt and yes we can have an abroad holiday each year but not without saving and/or a credit card. Just because others earn less doesn't mean in the grand scheme of things that those who earn £50k are loaded. They just mainly aren't struggling, it doesn't mean there is much disposable.

Seriously? You’re posting this where the median wage is less than £30k and there’s potentially the mother of all recessions on the way.
You don’t need to tell people what rich is.

Fiscal drag means that ever-more people are HR taxpayers - the threshold should be much further north of the median salary (34k iirc?)

The IT threshold should be higher.

Also - unpopular opinion alert - they should bin the 60% marginal rate for >£100k. DH is a consultant trying to organise a waiting list clearing initiative post-pandemic. No consultants want to give up half their weekends to take home 40% of the headline money on offer. I wouldn’t either. It absolutely influences people’s productivity.

There are different ideas being brainstormed for those on universal credit etc. This threshold increase isn't to help them. It's to help a different demographic of mid level earners. As quoted below she said it's to put money back into peoples pockets and grow the economy, to do that mid level earners are the ones you want to target. If you free up some of their money, they will most likely put it back into the economy which is what this idea is about. Those who are struggling need a lot more help than this as they don't need a boost to have disposable income, a lot of them need help to even eat and heat their houses which is something that needs an entirely separate approach.

Only it won't grow the economy will it ?

Any tax savings will be offset by inflation which is being driven by the external economy

It could make inflation worse if it did increase demand as we are in a supply limited situation