to think that the threshold for higher of income tax is far too low

[ReallyTired]

www.dailymail.co.uk/news/article-2721477/Surge-police-teachers-dragged-40p-tax-band-More-1-6million-employed-pay-higher-rate-decade-ago.html

Higher rates are starting to hit people in ordinary jobs. In 2003 there were no nurses paying the higher rate of tax and now there are 72,000 nurses in the higher tax band. Middle to high earners are the work horses of the UK economy and high taxes act as a disincentive to working harder or taking on more responsiblity. We need these people generate income to pay for benefits.

I feel that cutting of child benefit also harms the ecomony.

We have maintained our income throughout the past 5 years by dh working his arse off and being promoted. His earnings have gone up loads but with very little difference in take home pay due to tax, pension, losing cb etc. tbh I think that is entirely fair as at least he still has a job and we are not exactly on the streets.

The higher rate of tax, is not equal... there are plenty of ways in which you can use it to your favour if you have a pension or have some sort of work place child care scheme for example. It means that two people on exactly the same wage, can still pay different amounts of tax effectively which is a little bonkers!

I am personally very much in favour of a flat tax rate with a lower start point because it removes so many of these inequalities. Things like pensions/child care etc, should and could be added on top in a far more transparent way then too.

I do think that the higher rate is probably about right though, because a certain percentage of the population are needed to support the bottom end, whether we like it or not.

So maybe a flat rate of tax isn't necessarily best, but we could have more thresholds on a sliding scale and not be faffing around with a complicated system with a personal allowance that is then taken away.

so the current effective rate of tax now (inc ni) is as follows sorry, i am an anally retentive accountant and on mat leave and this is more stimulating than peppa pig!

10k - 245 = 2.5%
15k - 1845 = 12.3%
20k - 3445. = 17.2%
25k - 5045. = 20.2%
30k - 6645. = 22.15%
35k - 8245. = 23.6%
40k - 9845. =24.6%
45k - 11,758 = 26.1%
50k - 13,858 = 27.7%
60k - 18,058 = 30.1%
70k - 22,258 = 31.8%
80k - 26,458 = 33.1%
90k - 30,658 = 34.1%
100k -34,858 = 34.9%
110k -41,058 = 37.3%
120k -47,258 = 39.4%
130k -51,458 = 39.6%
140k- 55,658 = 39.8%
150k- 59,858 = 39.9%
160k- 64,558 = 40.3%

but to be fair, the lower salaries are then offset by benefits etc, so they effectively pay nothing or are net beneficiaries. So they would have to decide what the living wage is, and not charge tax below that, then start at 1% and go up a percent every 5 or 10k

Isitmylibrarybook:

No, the figures only include income tax and NI. I didn't have enough time to calculate figures including any benefits, tax breaks, student loan repayments etc. that potentially people may be eligible for/paying out. Apologies, should have made that clear in my original post!

The lower salaries are only offset by benefits of you have children. If you are single, or in a couple, those are the wages you will live on. I know plenty of people who earn just over the working tax credit limit, and get nothing on benefits, in spite of being low paid.

Even if you get benefits, they may be extremely low. For example, £5 a week.

Dh pays top whack tax. It doesn't dis incentivise him to work hard. I don't believe that.

What pisses us off the most is that however much tax we pay and even if it were increased, our NHS still isn't fantastic and our education system fails so many.

Problem if if they did reduce the proportion of people paying HRT, they'd have a deficit, which they'd have to claw back from somewhere.

And I agree, tax is far too complicated in this country. But I guess it would have to be.

I wish people would stop thinking that lower salaries are offset by benefits. I think we should be moving away from this mindset. Many people on low salaries don't receive any benefits whatsoever.

So when do tax credits stop?

witchway,

That might be fairer, if people's outgoings scaled proportionately too. Wealthy people do spend more on food, housing, utilities etc, but it doesn't come close to increasing at the same rate their income does. Person A on £1,000,000 a year doesn't spend 100 times more on food or electricity or whatever than Person B on £10,000, therefore Person A has a much higher proportion of their income as disposable... Person B more than likely has no disposable income at all.

25% of each of their incomes (while theoretically the same proportion) has much more significance for B than for A... £250,000 sounds like a lot (is a lot!), but leaves A with £750,000 to cover their essentials. Even in a £5million mansion, they'll spend less than half that on a mortgage, so they'll have to struggle by on a mere £400,000.

Person B is left with £7,500... call it £600 a month. Say B is lucky and/or frugal and pays £400 mortgage (two thirds of their income), £50 utilities and £50 food... That £200 tax she pays is twice as much as she has available to spend on everything else in a month.

So... no. Although it looks reasonable on the surface, a flat tax rate is desperately, gaspingly unfair. It completely lets the wealthy off their obligations and amounts to little more than vindictive punishment of the poor. 25% is an almost insignificant amount for the very wealthy and could literally be a life or death sum for the very poor.

Hah... took too long to post and didn't see answers above.

You can reduce some of this unfairness with personal allowances and tax credits and in-work benefits and so on, but then it's not simple anymore, which is one of the few redeeming features of flat-tax. If you're going to do that, you're basically just arguing for a tax-cut for the rich...

No decent person wants people on low incomes or their families to suffer. We need to find ways of raising revenue that doesn't have tax hikes. Perhaps we should have more tax bands than at present. Perhaps tax should be 30% at
40k then rise to 40% at 50k and be 45% at 100k.

The present tax system is ridiculously complex and there are bottlenecks like child benefit or losing personal allowance that are unfair. Different people having different personal allowances because of age or disability is unfair. Why should David Blunket play less tax than a profoundly deaf person on the same income?

www.hmrc.gov.uk/rates/it.htm

Adding more tax brackets adds complexity though doesn't it?

I think bedraggledmum shows that tax is very clearly tapered. Adding in an extra step to the higher rate tax would basically make the effective rate for someone on £45-50k 25% rather than 26%. About £100 a year difference. Seems small in the grand scheme of things.

There is certainly some truth in the statement that someone on £17k a year with a family in London who rents may well have as much cash as someone on £40k in London because of the way housing benefit can work. I worked out we would get £18k on housing benefit alone if I chose not to work. I was amazed how high the sum could be. I think some less well off people sometimes assume someone on £40k a year keeps £40k a year.

In fact they keep £30,000 after tax adn then out of that comes their housing costs (likely to be £1200 for a flat anywhere in inner and outer London - about £14k a year ) and childcare costs which full time are about £10k per child in London.

So these supposed very high earners are often on sums which net are the same as the lower earners.

A flat tax of 33/3% tax/NI for all is very fair and means the rich still pay an awful lot more tax than those who earn less. 33.3% of £2m is a huge amount of tax to pay.

Also complexity in the system and high rates puts people off working harder and earning more. It also means a husband who works might put his savings into his wife's names which some would say is appalling tax avoidance which ought to be illegal.

YANBU - it's stupidly low, only 5k or so above the alleged average wage - hardly High Rate!!

Seem stupid that someone on 35k is in the same tax bracket as Alan Sugar

It should kick in around 50k.

"Also complexity in the system and high rates puts people off working harder and earning more. It also means a husband who works might put his savings into his wife's names which some would say is appalling tax avoidance which ought to be illegal."

Interest rates are so low that transfer money into your wife's name to avoid tax isn't worth the effort, yet alone worth public money to prosecute. At the moment husband and wife can happily transfer assets like houses between each other without captial gains tax. It would be illogical to prevent the transfer of savings between people.

I feel that things like losing child benefit or the personal allowance are pychological barriers

Damon, Alan Sugar will be in the upper rate 45% (47% including NI) not the 40% (42% including NI) but I get your general point.
My view is the state is massive so taxes are high for most people. There are not very many rich people at all so most tax burden has to fall on the middle earners because as a nation we spend so very much and much more than we can afford so have massive interest payments too. The solution is simpler taxes and much less provision by the state of many things and thus lower rates.

I agree with less provision by the state. No point in taking away with one hand and giving with the other. The tax credit system is insane. But I do see the thinking behind it. Take low earners out of tax completely. Nobody who earns less than £15,000 should pay tax. CB for first two children only.

Chunderella DH is American ex-US Air Force. He works on the base for the US government and is paid in dollars, he pays US taxes not British taxes and does not use the NHS - not on a formal 'no recourse to public funds' visa but effectively the same under SOFA.

It's no big deal for us, as the trade-off is that the US government pays our Council Tax so I wasn't complaining, just stating a fact.

I'm not British, I'm an EU immigrant btw - the DDs have dual Dutch/US nationality. If the UK leaves the EU, I will naturalise and resent the hell out of paying the Home Office £1k for the 'privilege' and still support the Dutch football team

I like living in a country with a well developed infrastructure, welfare state, health service and all the rest of it TBH and am happy to pay taxes.

It just irritates me when they are not fair / or are illogical / or fall too heavily on the wrong people etc.