AIBU to ask a question about Tax paying and what is fair?

[Taxquestions]

Regular but name changed for this thread - Pom Bears, Water Gun, Penguin Date etc.

Although this is not a thread about a thread, I read a thread today which really raised my eyebrows about some people's beliefs on what tax payers should really be paying in tax. I am interested in all views.

One of the contributors seemed to believe that tax payers should be taxed so highly that their eventual income stream would be nearer an average salary i.e if you earn't 100K you should be paying 75% back in tax.

I read things like "well they don't actually pay the higher rate".....errm looking at my P60 I can assure you they (I) do "well they have accountants to lower the rate for them" how exactly would this be? HMRC are scrupulous, there are FSA rules and regulations and there isn't any way to "fudge" the system - if you are not in this system please tell me where on earth you get the opinion that everything is fraudulent.

I wonder what the general opinion is to someone like me...I earn over 100K a year, work bloody hard for it, have very little tax free allowance (in fact I think it is more like 0), don't take up a NHS space as have private medical insurance, don't take up a school space as my children are in private for non snobby reasons despite the opinion that some hold. I employ over 100 people, am a fair manager/employer who pays above the national/international average and I contribute a substantial sum of my very hard earned income every year in both Tax and NI contributions. I don't have a final salary pension scheme and will be in the same position as everyone else who has either worked without a final salary pension or those who have never worked come retirement (subject to any savings).

So mumsnet do you think I should be penalised more for loving my job, being good at it and wanting to work hence being afforded the salary I am "lucky" to earn? Should I go out to work just to put more into the tax pot?

So as not to drip feed whilst I put "lucky" - it has been far from it, I am working class through and through left school early with no qualifications and worked my way up the ladder. This makes no difference to me but just to clarify for those that might also assume I was born with a silver spoon in my mouth :)

Re: Sox - I am sorry I made that assumption but it was a pretty obvious leap to make and you did you let it go unchecked on a previous occasion. I'm also not sure why you would bring up that you have to be compliant to laws that affect your job. Everyone does. That to me was the start of the derail. Anyway - apologies.

I'm not attacking you - apologies if you think I am. You haven't been at all clear on a number of relevant points - whether you run your own business or not, whether you are an employer or an employee. It is frustrating to have these relevant questions ignored but to be continually pestered for responses on whether 'people' think YOUR SPECIFIC tax burden is correct. How could we possibly know unless you answer the questions?

The tax in the UK is outrageous. When I told people in Ireland how much tax I was paying they couldn't believe. Threshold for HRT should be much higher.

If you were in Ireland, you would find yourself paying direct for many services (such as NHS services) that you receive free at the point of use in the UK because you have paid your tax.

IMHO the UK culture has devolved into one in which success and criticism of those who succeed is encouraged. Some of the comments on here are awful to read.

I think the UK is a very socialist country, and those who shout loudest about how people who don't work somehow "deserve" more I think contribute to a lack of motivation in the type of worker that needs to be valued and rewarded.

I think the current tax system reflects that, as opposed to any overseeing end aim of doing something that is best for everyone's lives and futures.

This notion that higher paid workers are somehow dim, less hard working and less stressed is a fiction. I'm guessing people who think that have never been in a really high stress working environment, subjected to the constant monitoring, pressures to make profits and bring in new business and working in a full personal blame culture, doing work which requires such fine attention to minute detail of a constantly varying nature that burn out after 5 years or so is quite common.

Minipie I agree totally with your points except 3. I think quite a lot of people do earn their profits from housing and it is one of the few incentives left for the overtaxed mid level employee in life. Maybe you are thinking more of our parents' generation who bought cheaply and enjoyed massive profits.

I agree that it would hurt no-one to tax IHT at a much higher level, and find it strange that there is so much vitriol about people who earn high somehow being greedy, etc but the same critics would have no qualms about earning a fortune from a lucky accident of birth followed by death.

If it's the former, then history shows very clearly that hiking tax rates hads a negative impact on the overall tax take, thus reducing the amount we can actually spend as a nation on public services.

Not actually true - the Laffer curve is theoretical, and highly disputed. It has been taken up by right-wing policymakers but is not based on historical data.

Tonde - you asked me at 08.56 this morning about my employee status, I hadn't seen that post as I was commenting on another post. You asked again at 11.12 and I answered at 11.18. Sorry this wasn't quick enough for you.

I didn't think I was pestering people on MY SPECIFIC tax burden, I thought some of us were having a reasonable debate on taxation in the UK and whether higher rate tax payers should contribute more income tax.

However, the thread does seem to keep derailing because some people want to attack me for some reason rather than give an opinion or add value to the discussion.

And I don't think it is socially responsible to set the tax rates for high earners at too high a level since we know historically the result is they pay less tax, low earners pay more tax and the economy is damaged.

As above, this is not actually true - in fact periods of high tax take on higher earners have historically coincided with th lowest measures of social inequality, the highest levels of median real earnings and the highest levels of collective state investment in infrastructure, collective social and health programmes, and so on. It is a favourite claim of rightist economic pundits (and popularised by Reagan and Bush-era economic advisers) that the Laffer curve is historical fact, but it remains a theoretical conjecture and highly disputed.

Trebizon I'm slightly dubious as to whether people genuinely turn down higher paid roles because of taxation if they are higher rate tax payers anyway

DH turned down a job offer recently at 8k more than his current job for this reason. It involved a longer commute, longer hours and more stress. He is already a higher rate taxpayer. Out of that 8k extra, he calculated that he would get around 4k of it in his hand. That's around £330 a month. Perhaps £270 after extra travelling expenses. Or £67.50 a week.

I appreciate that's a lot to some, but it wasn't worth it for the risk of change to DH accompanied by the extra work required. So that's the sort of example at quite a mundane level where people do turn higher paid roles. I shouldn't imagine its unusual.

I also wonder about a lot of part time workers, especially doctors in the NHS, if they make a similar calculation and decide that its not worth their time working full time for the amount extra they would earn after tax? There is a real difficulty now being caused by the high number of part time GPs.

Melonade - great post.

I definitely think the 40% tax band should kick in at 50K pa for those in South East

Hell no. We need to be less London centric not more so. Tax breaks to live close to London would simply add to the divide between there and the rest of the country.

i think the top level of 45% is enough - no one should pay any more than that on their income. Im not sure why some people think becuase someone earns 100k or more that makes them rich - you dont know anything about most of these people that earn over 100k so you cannot judge them, get over it. Instead of being jealous of these people you could always retrain yourself and move jobs & move town in order to put yourself in a better position to get a job that does earn 100k a year.

Not everyone can attain a level of knowledge/skill to do a job which lets them earn this kind of money. Not everyone wants a level of responsibility that comes with earning this kind of money either as lot of these people make sacrifices to do it. If someone offered you 100k a year but it meant travelling for 9 months of the year and working 100 hrs a week would you do it - would you leave your family behind?

i keep hearing the argument that its expensive to live in the south east/london - if you dont like it move - no one forces you to live there. stop whinging it makes you sound entitled.

i agree that the govt needs to stop people being able to set up single person companies who draw very small small salaries but then pay themselves a massive dividend every month/quarter which is only taxed a corp rate. its effectively tax avoidance as everyone knows its a salary - you cant afford a massive house and run a jag on 100 a week...

Trebizon with extra responisibility, there often come extra hours, extra workload, extra politics to negotiate. Sometimes your job becomes dependent on meeting targets that weren't previously the case and thus less predictable and less dependable.

The extra cash is often a major incentive.

If you really believe everyone would just do it for the love, I think you're being rather naive. Portraying those who wouldn't do it without a pay rise as greedy shows a spectacular lack of understanding of human nature.

For most people there is a definite tipping point between the extra calls on time/energy/patience and the extra cash in the pocket.

Except of course those that take on the roles of power and they are different beasts entirely.

Would you like to employ me to sort out your apostrophes?

in fact periods of high tax take on higher earners have historically coincided with...

Are you referring to high tax take or high tax rates? The two are not the same. This government has reduced tax rates for high earners but the tax take from the top 1% has increased while the tax take from the bottom 25% has gone down.

I agree that the Laffer curve is not as simple as some people say - it isn't a curve for a start. And it certainly doesn't mean that reducing tax rates will increase tax take - that depends on whether current rates are above or below the optimum.

Some of your other claims are true if you are referring to tax take but untrue if you are referring to tax rates.

There was a very interesting interview on the Today programme this morning with a chap who has just written a tome about inequality.

The low levels of inequality since WW2 were the outlier, not the new norm.
Society is now reverting back to higher levels of inequality as there have always been
BUT
he made the really interesting point about the difference between Wealth and Income

Currently in much of the OECD, wealth is taxed at a lower rate than income, despite the returns being consistently better.
Changing this paradigm will help to reduce demonisation of higher salaried people - who are nowhere near the uber rich
while maintaining the tax take from them that supports everybody on less than £30k a year

If lower earners do not think they are being subsidised, add up the value of

• free schooling
• free health
• security, police, fire, coastguard etc
• lights and bins and roads (90% paid for out of general taxation)
• social housing

Inequality drives industry and innovation.
Trying to stamp it out leads to corruption or stagnation
but it can be managed

Barbarian, if it is bothering you that much you could pick up on every mistake I have made and highlight it?

History has shown that a pedant adds so much value to a thread - not. But you fill your boots.

"which is only taxed a corp rate. its effectively tax avoidance as everyone knows its a salary -"

This is incorrect. First the business pays corporation tax. Then the recipient of dividends pays income tax.

So he turned down the job due to the cost and length of the commute ... Not the tax

"So he turned down the job due to the cost and length of the commute ... Not the tax"

The tax reduced the additional money available, the travel costs reduced it further. More than one factor.

Also can someone please clarify that all these people who pay '40%' tax do so on every single penny they earn or just a proportion?

I am sure my ex only paid it on earnings over the 30k mark

Could be wrong though

But it matters!
(Pause to lie on the floor and cry)

I promise you that you will be taken more seriously in your professional life if you never write 'I earn't' again.

There you are, I have helped you, free, gratis, for nothing.

No it's only what you earn over.

Just a proportion gordy

gordy A PAYE employee pays 20% tax between the tax allowance figure (£9440 in 2013/4) and £32,010, 40% tax on earnings between £32,011 and £150k and 45% over £150k.

Businessasusual
This is incorrect. First the business pays corporation tax. Then the recipient of dividends pays income tax.

But a small company pays corporation tax at 20% on the dividend.
It then arrives with a 20% tax credit so any basic rate taxpayer has no more tax to pay
but gets to extract a wodge of cash from the company without payment of NIC

its called tax planning
as of next week, CT is the same rate as basic rate tax for ALL companies

why is my tax allowance only £8k something then?