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

Yeah except as the mere part timer who also has their own business half of that is bullshit.

PPs personal 60% tax has fuck all to do with growing their business and hiring people because that is taken from your company finances - your retained earnings. You do not get taxed 60% on that. OPs personal tax is wholly irrelevant and a load of BS.

I do agree that it's an awful way of increasing tax, as you lose a lot more on that part of your income. I think the personal allowance should be for all incomes, they could just have a higher rate of income tax at 100k than 50k if necessary, I think that would be a better system.

I do know what it's like to not keep much of your money, if I work overtime then for every additional pound I lose 41p of my tax credits, 20p in income tax, and 13.5p in NI.

the gains from having perfect attendance, going the extra mile, being good at your job are minimal if you’re at the bottom end

Tbh the gains feel pretty minimal at the 3-figure end as well - especially with 15-odd % inflation on top of 60% marginal rate.

The typical reasons businesses pay people £100k is that they have specific skills and/or commitment. Nobody at that level in the private sector gets paid overtime. If that job could be done for less, it would be happening already. Stiffing successful people via the tax system because they are perceived to earn “too much” stifles ambition and motivation.

I don’t want to pay extra into a pension that I may never see just to avoid giving 60% to the government. Controversial but how about I just get to keep more of my own money?

I have not divulged all of my or my partners personal/financial details or situation. It’s not BS. But lets just pretend you are correct. Congratulations.

Well these tax cuts are probably not going to happen with the eyewatering sums Liz is borrowing to subsidise our bills. She'd be absolutely bonkers to

I agree, OP. Raising the higher rate threshold to £80-90k is the right move. Then all thresholds should be uprated annually with inflation.

If the higher rate tax band had been uprated with inflation from when it was introduced - so stayed the same in real terms - it would now be roughly £90k. That was the intention: to tax high earners more, not middle earners. The manipulation of thresholds has been an awful stealth tax making people poorer for many years.

Thresholds for the personal allowance, child benefit (if they continue with the pointless policy of it not being universal when we know it costs more to means test it) and things like tax-free childcare should also be uprated annually. And the distorting effect caused by the removal of the personal allowance also needs to be addressed: that was a stupid policy that has (in my view, predictable) but unintended consequences.

I hope she has the resolve to rectify these issues but I’m not holding my breath.

I wish there was a “like” button.

This will benefit us
I still think it’s ridiculous

What percentage of the population actually earn more than 50k anyway ?

10% ? would be by definition of pretty rich

Interesting chart but conveniently only goes back to the ‘90s. A longer-term view is necessary to understand how far the threshold has moved from its intended purpose. The number of higher rate tax payers has increased by more than 50% on the last few years. It absolutely needs readjusting for historical inflation to reset it at an appropriate level, and then uprating with inflation annually. As do all tax thresholds/ benefits thresholds etc.

People at the bottom end of the economy are always going to be hard up.

I think raising the threshold at which
higher rate income tax is paid is a great idea. It encourages productivity and encourages people to try and get promoted due to more cash in the pocket. Taking a promotion where after tax you are only £100 a month better off isnt always worth the trade off of more pressure / longer hours. I want out young people to have ambition and for hard work to be worth it rather than the whole of society scrabbling along at the bottom.

People that have more disposable income then spend that income which keeps the economy turning.

Taking middle income families more won't go directly to poor people. Thts a different issue.

Only 6.1 million people in the UK are higher rate taxpayers in a population of 67 million, 36.3 million of whom are of working age.

@sopsmum you are not talking about those at the bottom end, but the vast majority of people who are not higher rate taxpayers.
The trickle-down theory does not work. It is junk economics much beloved by people who do not understand economics.

Don’t forget that if you have young children you also lose the 30 “free” hours funding and “tax-free” childcare, which can equate to another 15-20%. And if you have a student loan you lose another 9%. So what is left? Earning £1000 and getting paid £100-150 net. This is why it distorts the economy. It was one of the most stupid policies even put in place if you want to address inequality and have a pipeline of talented women moving up in their careers who also happen to be mothers.

Distortion of statistics. How about you compare it to how many people actually work i.e. what proportion of taxpayers pay the higher rate?

and then do the same calculation for 10, 20 and 30 years ago.

@TheSpringyGuyAndTheCheeseEater I can't find that information. If you can, please post it with a link.
I can find in 2018/9 only 6% of workers paid higher rate tax. The numbers paying it has jumped by roughly 50%, so I would estimate 9% of all workers, but I don't know exactly.

So are you saying that the infilled jobs today are predominantly those at the higher salaries because people won't take them because of the fact their pay rise won't be as good as they will lose more or it in tax ?

I'd love to see evidence of that

I had the same initial reaction about this to many of the people on this thread and then I really thought about it.
Lots of the problems in the NHS could be helped by upping the higher rate tax bracket (and getting rid of the pension cap).
Staff would be less likely to move to countries which treat them better and would be more incentivised to work extra hours.
I know you all want them to survive on the claps and don’t think they are worthy of being paid more, but the reality is that most people are incentivised to work more for more money.

The vacancies in jobs are at the minimum wage level.
There are some skill shortages in specialised sectors.
But the real shortages are at minimum wage level or close to it. This has caused some businesses to close.

@Goforgo That really is not true.

But people get more money as they progress even when then move into the higher tax bracket

There comes a point at which more money is worth less to people than time with their families and hobbies and low stress

And that point is usually around the time they have enough for basic needs and wants and a little left to save

@antelopevalley

www.rcm.org.uk/media-releases/2022/june/four-out-of-five-nhs-staff-say-pay-is-main-reason-they-would-quit-their-jobs/

So nothing to do with tax bands then ?

@Goforgo NHS staff have had no or barely any inflationary increases for over ten years now. They are being paid less in real terms than when they started their job. My DP worked for the NHS and left as in real terms the salary was getting lower and lower. He just wanted the salary to remain the same in real terms.

So most of the population go to work just for fun, do they? It isn't about money at all? Ok then. 🤣