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 :)

I wonder what the general opinion is to someone like me...I earn over 100K a year, work bloody hard for it
Ahh the belief amongst the wealthy that they 'work harder' that than the rest of us so they deserve it. It is a fallacy that there is any link between effort and financial reward. Certain skills are disproportionately rewarded in a capitalist system. 90 minutes belting a pig's bladder around a football field is worth multimillions, as are bankers who managed to fuck up the world econonmy, whilst cleaning the elderly's piss, shit and vomit is worth minimum wage.

I 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.
Who paid for the training of the Doctor and Teacher? There isn't an infinite supply of consultants and your consultant in private practice means that someone else, possibly with a greater need will wait longer whilst the consultant deals with your more trivial complaint.

I employ over 100 people, am a fair manager/employer who pays above the national/international average

I assume that this isn't a charitable enterprise and you aren't giving these people a job to keep them off the streets. It so you can make a profit from their labour.

I contribute a substantial sum of my very hard earned income every year in both Tax and NI contributions.

Well done, you do the legal minimum required.

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)

My heart bleads. If you can't make provision for your old age on your above 100k income than you are profligate in the extreme.

What gets up my nose, quite seperate from the debate over whether the rich are over or under taxed, is that the op has been busy enriching herself and seeks credit as if it was some grand philanthropic geasture.

Not seeking any credit Compos, just giving the facts so as not to be accused on drip feeding.

Thanks for your contribution it was really useful to the original question

OP yanbu. I think people like you are to be congratulated. I think HRT is too high percentage and should be lowered or the starting threshold raised. I say that as someone on average earnings, but actually I feel no incentive to increase my salary / hours as then I'd fall into the HRT band.

Taxquestions I live in a (currently very sought after) area of fairly central London. A 5 bed terrace 2 years ago was about 1.25-1.3m. Now selling for 1.7-1.8m. Nuts but that's what's happened.

Talkinpeace the trouble with taxing "wealth" is it sounds like you might mean taxing people who own valuable assets - but where they haven't actually yet got the money from those assets. So if someone owns a £2m house, I don't think they should be taxed just for owning that house. (all though this may not be what you are suggesting). After all the price could drop before they sell. But they should be taxed on any profit they have made when they do sell.

I have made more from buying and selling one property (through sheer luck, good timing, and parental help to buy) than I have from my job. I have paid no tax on the property profits whereas I've been taxed pretty highly on the money I've earned. path is system makes no sense and just means we, as a nation, plough everything into property and don't bother trying to qualify for higher paid jobs.

^although not all though. gah

ComposHat, what the OP's intentions are hardly matters (or indeed, any employer/employee/taxpayer). People need jobs, and if someone fairly employs them, makes a profit, and connects a supply with a demand - then that's a result.

I think wealth should be taxed more than income and this would resolve a lot of the problems with lower earners not bring able to afford housing etc. it isn't that they're not paid enough; it's that there is a shortage of housing which is hoarded and supply is restricted.

I would support a wealth tax like in Norway where I believe you pay 1% of the value of your total wealth each year eg the equity in your house. This seems fairer and more likely to encourage hard work and earning money.

I would also support removing tax exemptions from btls, building a lot more social housing, cancelling help to buy, increasing tax on empty homes after 6 months to discourage the off plan flat sales bought by investors particularly in the Far East which are never used; and encouraging institutional landlords eg pension funds for residential property.

I can kind of agree that the gain on houses going untaxed is slightly bonkers - you pay gains on house in the US, for example. We've made a stupidly large sum of money in the London property market.

I'd just like to sell my current house before any tax code revision, please.

I think wealth should be taxed more than income and this would resolve a lot of the problems with lower earners not bring able to afford housing etc.

No, no, no. Tax income, not wealth. Why penalize people for investing?

I don't see how tax rates of over 50% can be justified on any level. And I think the 40% rate should be set at a far higher threshold than it is, £250,000 or something. But then again I think people earning under 25k should only be paying a marginal amount of tax anyway, one or two percent, and more importantly, the government should set spending according to what money it has coming in, instead of spending money and then trying to figure out how they're going to pay for it all. The amount of tax EVERYONE, rich or poor, pays in this country is far too much considering the standard of service we get in the public sector.

minipie
you might mean taxing people who own valuable assets - but where they haven't actually yet got the money from those assets. So if someone owns a £2m house, I don't think they should be taxed just for owning that house.

Land taxes are exactly what I mean. The UK is almost Unique in not having them.
In the USA, annual land taxes on a £2m house would be around £30k a year, every year, whether lived in or not.
You don't like it, sell the house.
Houses and land are easy to tax as they do not move.

truffleoil
Why penalize people for investing?
Indeed, but when maximum tax on investments is 38% and maximum tax on earnings is 47% (including NI), there is LOTS of scope for levelling the playing field

The UK should also immediately get rid of
Non Dom status (again the only country to have it)
and allowing LLPs to have corporate partners (another tax haven ruse run from Central London, mainly for the benefit of overseas money launderers and criminals)

I've never heard someone having a career described as "busy enriching themselves" before ComposHat!

Bad people, for having ambition, working hard and earning well, and for paying only the legal minimum tax.

Thank goodness you aren't in charge of the country - I don't think many people would hang around for long!

I'm pretty sure DH wouldn't have felt daunted at all by say, an extra £150 a week. They wouldn't have offered him the job after the interview if they thought him the type to appear too daunted to do it.

Likewise, theres a certain level at which I would cease to feel daunted by a job. For a stressful, difficult, pressurised job I would feel only slightly daunted at 50k a year, not at all daunted at 100k and too daunted to take it (unless very young) for 25k a year.

So you see where how much tax you pay fits in - if an 8k rise only gives you 4k in practice, for some people, its not worth doing a large amount extra for.

I don't think trying to place fictitious psychological reasons on someone's reluctance to paying a job is at all equivalent to a hard financial decision based on take home pay after tax.

Sure, TalkinPeace, but investments are made with after tax income, and the business venture has been taxed. This is someone taking a risk, investing in someone's dream. If someone carves some savings out of their income and starts an investment portfolio, why should they be penalized so heavily?

When looking at a job, I consider the actual rate of pay :
hours out of the house divided by net pay.
Changes to job structure have to be a better option than staying put.
That is the sane way.

My headline pay is far less than many others, but my "per hour out of the house" rate is fine by me.

When looking at a job, I consider the actual rate of pay

"per hour out of the house" sounds a lot like after-tax income to me. I'm not sure if by "actual" you mean "after tax", but in my mind the pre-tax income is totally irrelevant because my living expenses are after-tax.

"If someone carves some savings out of their income and starts an investment portfolio, why should they be penalized so heavily?"

Hence the government allows a certain amount of this in tax wrappers ie Isa and pension and gives exemptions for other kinds of investments it wishes to encourage, such as SMEs via VCTs etc.

truffle
I'm self employed so look at gross and net
but the more important issue is how many hours per day in desk and travel time are included in the job

£300 a day for a 6 hour day with one hour travelling each way - 8 in total
is the same as
£600 a day for a 10 hour day with an hours travel each way and half the weekend - 16 in total

I think it's a fine dividing line tbh. My DH is technically self employed but on the basis of current percentages paid about £250,000 tax last year and the year before. If that tax bill was higher we would cease to be domiciled in the UK and there would be a net loss to the UK economy. He also, by the way, employs others who also contribute to the UK economy. Depends whether the UK economy wants that tax or not I think. Also, whether it wants our stamp duty, VAT, etc, etc. We put in far far more than we take out and there is a limit to how much any individual is prepared to put in particularly when public services are so poor. Whilst we would be prepared to pay an extra penny in the pound, along with everyone else, to ensure a much better NHS and Education system, we would not be prepared to pay disproportionately compared to the contribution of others.

I believe the net gains from the current tax rates outweigh what they might be if taxes were increased to punitive levels. If that were to happen there would be fewer jobs being created and a worse status quo for all. There is no iron curtain and the UK cannot force people to stay here if it makes conditions too punitive - that will have an impact on the overall well being of the nation.

particularly when public services are so poor
which country has better services ?
and a lower total tax bill for high earners?
www.economist.com/blogs/graphicdetail/2012/10/focus-4

Out household income is quite some way beyond 100k, we don't work that hard, have benefitted from a lot of luck and think we should be paying more tax.

Nearthewindymill why would you leave the UK?

This is broadly an issue of flat tax versus progressive tax for me.

I would be in favour of a flat tax if we lived in a society where there are equal oppurtunities. But many people are advantaged by (even modest) wealth. They can afford to send their kids to private school or move into the catchment of a great state school, for example.

So - as a higher rate taxpayer - I would prefer a progressive tax system that redistributes wealth and (hopefully) levels the playing field a little more.

I wish we could get away from this notion that how hard people work is reflected in their pay. I also work "bloody hard", but then so do most of the population (inc. SAHP) and most earn a lot less than me.

I also get mildly annoyed by this "self-made" person stuff. I am sure there are many out there. But truly "self-made" people - who had no family/friendship networks, absolutely no money etc... are VERY rare. If you are born with nothing, chances are you will die with nothing. And social mobility is decelerating at a frightening rate in this country.

Nor do I think opting into private provision helps the state sector (me & my family have private healthcare btw). I would have to dig out the research but I do recall that private provision can actually exacerbate existing inequalities.

I wonder why Upthere chose to remove her threads...there wasn't anything controversial in them and I would have liked to read them properly before commenting. I didn't really understand the point of her posts as they just seemed to be a subtle dig for no good reason. However, the gist I got was that I wouldn't be qualified for applying for a higher salaried position and would be daunted by the role. Therefore my reasons for not taking a higher salaried role were nothing to do with what was going to end up in my bank account and I was somehow making it up that tax considerations would be part of my consideration process.

Not the case, I am long enough in the tooth to ascertain what the role actually is, whether I have the skills and experience to undertake the role and whether the after tax remuneration is worth it.

Sorry Headsdown not Upthere was the poster!