Should the Lower Rate of Income Tax be 40%

[ChilledOut79]

I have read so many posts over the recent Months regarding adding VAT to education provision & Labour tax plans.

All these posts seem to have recurring theme to tax "someone else" more, so the net contributors (who already subsidise net recipients through tax take), have to pay even more in the name of funding the NHS/state schools etc.

It seems to me, If funding services are that much of a priority, we should increase the base rate of income tax to 40% for everyone.

This would fund all vital services and ensure all mainstream tax payers have the same skin in the game.

Precisely

In principle, I agree with the point that you’re making. We need a simple income tax system which everyone contributes to. My problem is that I don’t know what the rate would need to be for everyone to pay the same % and for those at the top to pay their dues. It would also need to be a system that prevents smaller companies from tax avoidance. That’s costing millions IMHO and should be stamped on immediately. After the tax free amount, everyone should pay the same percentage and nobody should be able to avoid it by paying themself a pittance and taking the rest in dividends if they are self-employed.

@Andthereitis HMRC already collects tax and NI per payday for employees, it's called RTI. Employers submit returns for every employee when they pay them.
The problem is in this country we're not proud to contribute, see it as a burden. And that's what causes some people, who have the opportunity, to suppress their income and pay less tax.
We need an attitude shift to be like Scandi countries who see it as a privilege to contribute to a civilised society.

If you pay 'a higher tax rate' than 40%, you earn over £125k and pay 45%, meaning you are not the squeezed middle.

You can moan about how the top 10%, in your case earned from property, are hard done by, but don't pretend to be the middle.

Which particular people are you talking about and how would you "go for hard" on them?

@bergamotorange I have not claimed to be in the squeezed middle.
I have been talking about the squeezed middle.

Why?

You are proposing a policy that would make the squeezed middle poorer - why?

Again, asking for a friend, how do small businesses do not report income/avoid paying taxes? Really curious. Do you think small businesses are unaccountable and can do whatever the fuck they want?
Please don't say being paid cash - no one pays cash anything - apart maybe some building work?

Asking for a friend? In which case you will be more than aware of how the taxation game is played by these companies and their accountants. I am not saying it’s illegal but it is certainly immoral. I’m looking forward to Labour closing these loopholes assuming they keep their promises.

@bergamotorange I am not in a position to propose a policy.
I asked a hypothetical question about increasing all income tax, to see what the predictable response would be.

The point I've demonstrated in doing so, is the majority of society shout for more investment in services, but the group shouting the loudest don't ever suggest in parallel, they could also contribute more to make it a reality.

Their default setting is We want a better education system/NHS etc. but no way could I contribute a penny more towards it. That's the responsibility of the squeezed middle (not claiming to be here although was once upon a time).

That's the motivation in the post.

When this large section of society has this attitude/ position they will never get the investment needed.

I asked a hypothetical question about increasing all income tax, to see what the predictable response would be.

Isn't that called baiting?

Why do you think most people support a tax taper?

You suggested a silly policy. That's why you got 'predictable' responses. Because what you suggest is ridiculous.

Of course the majority of small busineses pay their taxes honestly, but small businesses can avoid and do avoid paying tax. One way, for example, is to pay staff in cash to avoid paying employers' taxes.

I guess this is intended as a thought provoking post. It is true that the problem for the UK is that the electorate want European levels of public services but they want someone else (high earners & the rich) to pay for it.

In fact the UK tax base is very narrow, with 29% of income tax paid by the top 1% of earners (~320,000 people) and 60% paid by the top 10% of earners (1). High earners in the UK pay roughly equivalent rates of tax and SSC to those in other European countries (51% vs 55%) , but overall tax take is lower because low/middle income earners pay less tax (28% vs 44%) that those in other European countries (2). As a high earner in the UK you'd really be better off living in another European country as you’d pay roughly the same overall tax and SSC but get much better public services, infrastructure etc. In fact we can already see the migration of high net worth individuals from the UK (~9,500 people), with the second highest net migration in 2024 after China (predicted)(3).

If the UK wants decent public services whilst retaining those who pay the most towards providing them, then everyone, especially the low and middle income earners, are going to have to pay more tax and probably move to a co-pay model for healthcare. No politician seems willing to tackle this, and if Rachel Reeves really wanted to “come clean” with the electorate she would not have boxed herself in by promising not to raise income tax, NI, CT and VAT (together 67% of total govt revenue) (4). Instead she’s probably going to have to significantly raise (as they represent only 11% of govt revenue) capital (CGT & IHT) and council taxes, which is likely to scare off more of the high wealth/earning individuals, potentially reducing overall revenue.

1. https://ifs.org.uk/taxlab/taxlab-taxes-explained/income-tax-explained
2. https://ifs.org.uk/taxlab/taxlab-key-questions/how-do-uk-tax-revenues-compare-internationally
3. https://www.visualcapitalist.com/mapped-millionaire-migration-in-2024/
4. https://ifs.org.uk/taxlab/taxlab-key-questions/where-does-government-get-its-money

@bergamotorange admittedly perhaps I'd have asked a slightly different question, along the lines of "Should everyone pay more in tax for the services they scream for", but the 40% was a vehicle to gauge response.

The predictability is more in the lack of ownership of virtually anyone saying they would pay more (there was a teacher further down who said she would pay 30% if it funded education).

It always comes down to passing the buck to somebody else, who they perceive "has more". Fact is many 40% tax payers are struggling to make ends meet. There is a misguided perception this cohort (who collectively already pay more than anyone else) should, and could, pay even more.

@Proudtobeanortherner No, funnily enough I am not aware of any 'taxation game' that would be within the reach of small businesses. in my experience it's all pretty straightforward and bomb proof and there are no loopholes. Not sure what kind of small business you have experience of.

Thank you, excellent post

Ok well that's illegal. You can't run a company by paying people in cash and not declaring them, that's bonkers.

Yes. I don’t see any problems with this 🙄.

What a stupid post.

Some of my income is from rental properties, it’s madness I don’t have to have to pay NI on it. That should be changed tomorrow.

All kids are entitled to a free education. All kids get free health care.

This is rubbish! There are loads of jobs that have extremely limited benefit and sometimes actively harm society. This is true at all levels of the pay scale. Someone working in a vape shop or McDonald's is hardly benefiting society. Don't kid yourself that those that are lowly paid are all propping up society.

How refreshing 🤗

Agree

But I also think raising the higher rate threshold will actually bring in more tax revenue than keeping it lower does. So many people try to avoid going over the 40% threshold and keeping it frozen stifles productivity. I'm pretty shocked that the so-called 'conservatives' froze the thresholds until 2028