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 :)

is it because I'm technically married?

Your tax code for the year just ending should be 944L
it will be lower if you have benefits in kind or owe back tax

from next week it will be 1050L (not sure how they will fit that in the software systems)
but EES Ni at 12.8% still kicks in at under £8k a year ( thanks Broon the eejit )

Barbarian, my use of English has not hindered me. You would be surprised at the level of English and grammar I see everyday in emails and the like and from very senior people too. I agree it matters but in the instance you have highlighted it is simply a mistake. We all make those.

Thanks for your help though, I thought you were being bitchy but it appears not.

argh of all the junk lying around my house it looks like I've recycled my self assessment thing that came the other day

they do think I owe back tax though, it is the subject of an appeal

am leaving it to proper grown ups to sort out but I did notice my personal allowance was quite low

Talkinpeace - as a case study do you have any knowledge of the success or not of Singapore introducing a flat rate taxation for all? Think it was in 2007?

I would not be surprised but I will defend my right to be appalled.

We recently had a letter from a head of sixth form beginning, "You're A level choices..."

It is my job (profession) to see that apostrophes are kept in their proper places and not left hanging around waiting to fall on the heads of unsuspecting pendants.

Thank you for your understanding.

OP
They did not introduce flat rate tax
www.economist.com/node/8733071
they introduced simpler rates - not the same thing at all once exemptions are taken into account
and the current system is deeply opaque (verging on tax haven basis) and regularly reviewed

flat rate taxes do not work in a global economy

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

No, Gordy, he didn't. He was really tempted by the job, and would definitely have taken it if he would have got more than £67.50 or thereabouts in his hand extra for doing so. It was a step up, an interesting job and the commute was perhaps 30 miles of driving (as opposed to 4 miles at present) but awkward to get to and lots of traffic jams/no public transport. But he found the job interesting, and thought the offer was a fair one. Few companies will offer more than 8k extra to an employee "only" on 50k at present.

So its very much the tax system that made it not worthwhile for him to take the new job. I wouldn't like to put a cap on it, but I think maybe around the £150 a week extra in his hand would make it worthwhile making those sort of changes. But that extra money all goes in tax, not to the employee.

Anyway, he works in an in demand field, other jobs come up (the industry really struggles to recruit); he might as well wait for a similar offer but without the extra costs and possibly a less stressful environment.

An employee I guess has to make decisions based on maximising their own income. Why not? He's already paying higher rate tax and its often a struggle to pay bills, so every penny counts. An 8k salary rise is not anywhere near an 8k salary rise when tax is deducted.

Seems obvious that a commute has to be balanced against the after tax income, this doesn't exist in a vacuum.

I'm self employed.
I count my time and fees from the moment I leave my house.
It is entirely appropriate for employed professionals to take the same factors into account.

I have an employee who cannot afford a pay rise because it would put them into a different pension contribution band on all of their earnings and cost them 2% of salary
and its the 40% tax cutoff
so we would need to give them a 7% pay rise to leave them in the same place on take home pay.
Oddly enough that is not an option.

thank goodness for spreadsheets

Not disputing there's an NIC saving - it's definitely better that way. But a HRT, which is what the thread is mainly about, can't extract an income over the HRT limit and only pay corporation tax, which seemed to be what Peggy was saying.

True, but they can make their wives and kids and aunties shareholders in a way that employees cannot.

Barbarian - believe it or not I consider myself a pedant too, well I did until this thread . A client of mine constantly writes "loose" instead of "lose" on his emails and it drives me mad.

Talkin, interesting article thank you. I should have googled a bit more. I will relay this to an acquaintance of mine who is evangelical about the introduction of a flat rate and how well it worked.

Yabu

I really dont see why, over the personal allowance, we dont all pay a flat rate 20% tax and close all the tax avoidance tricks. If I earnt 100k a year I wouldn't want to give 40% to taxes and if I earnt over 1 million 50% taxes.

Surely 20% of 1 million pound is better than probably the 1 or 2% that they pay now and get their accountant to use tax schemes etc to avoid paying more. Also as it is a percentage of the wage, the amount taken from all is fair(er).

Ive know heard of people who were on £400/500 a day and paying no tax as the contractor was paying via "0% loans to the employee" which never are paid back!

Or is this a too simple view.

"ia "0% loans to the employee" which never are paid back!"

HMRC are onto this.

"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."

Melonade it's not just our parents' generation. There are houses near me which have gone up in price by 500k in the past 2 years. Why should someone be able to buy a house, sell it for 500k more two years later, and pay no tax at all on that money? They haven't earned that money - they were simply lucky and rich enough to buy a house in the right place at the right time. The PPR exemption means that property is virtually the only way to make tax free money and that is what has turned property from a home into an investment. Not a good thing IMO. (even though my house has probably increased that much too).

As regards it being "one of the few incentives left for the overtaxed mid level employee in life" - my point is that if we all paid more IHT and CGT on house profits, then we could be taxed less on our earnings. So we'd be less "overtaxed".

I agree with minipie.

minipie where do you live? In the South East there has been no real movement on property prices apart from very recently. What kind of house are you talking about a 500k increase?

Minipie
Hence my point up thread about the difference between "wealth" taxes and "income taxes"

A friend bought a house for £1m - they spent £1/2 million doing it up and sold it a couple of weeks ago (just before the stamp duty change) for £2m - all tax free
so the house has provided them with income of £125,000 each, tax free, per year they have owned it

and the buyers were cash rich foreigners and will not live in it
its a five bed house in prime school catchments

wealth needs to be taxed on the same basis as income
then the rates on everybody would drop and more of the wealth that is locked up in tax havens would start sloshing around the economy for the benefit of all

You don't have to find extra stress daunting to not want to sign up for it if it's not going to make a meaningful difference to what you take home.

It's not always about being daunted, often it's simply a balance of the pros and cons.

Words like daunted are just as loaded as 'greediest'. They're there only to make it sound as if anyone who isn't prpared to take on extra responsibility for bugger all, really isn't the man for the job.

When actually that person might simnply being sensible.

In order to put up with the negatives there need be enough positives including cash after tax.

Most people I know take into account what they will actually receive in their pockets before taking on more work. Why wouldn't they?

Love that post, wordfactory.

Great post word - exactly right.