To think the tax free allowance should be hourly rather than annual

[user139328237]

Under the current tax system a person working 20 hours a week at £20 an hour and a person working 40 hours a week at £10 an hour have to pay the same amounts of income tax. This is despite the fact that the person working 40 hours would have additional costs in the way of commuting and quite often childcare as well as much less available time for other activities. The current tax system also leads to the situation that for many overtime would be taxed at such a higher percentage to not be worth doing which can often lead to short-term staff shortages in essential public services (quite recently seen in train drivers).
By moving to a system based upon the hourly wage the government could ensure all work at minimum wage wasn't taxed, while those who choose to work very part-time in well paid roles are taxed equivalently to those who do the same job full-time. This would increase the incentives for overtime and full time work amongst skilled workers many of whom have skills the country is short of while at the same time remove many who have to work long hours on minimum wage from paying income tax. A system based on hourly earnings would also help prevent the perverse situation in which part time work can lead to a higher disposable income than full time work due to take home pay not increasing as much as additional costs due to high marginal tax rates.

It's a bit difficult to understand the basis of your system. Is it that the more hours you work, the lower the % tax you pay. So you pay 20% on the first 10 hours, 40% on the next 20 then 5% after that?

It doesn't sound great...

How would work for those who get an annual salary rather than an hourly rate? Many of them do not have set hours, but are expected to work to get the job done. This will often involve very long days and/or working from home evenings/weekends for no extra pay.

Have you worked out the additional administrative cost of this scheme?

A bad solution to a non problem

How do you think it would work for people who don't work, ie pensioners? SAHPs?

I agree with you absolutely in theory.

It's completely unfair that the person on a board doing two meeting a year for £20k is taxed the same as minimum wage x 60 hour weeks (or whatever is works out).

But, unfortunately, it's completely impractical, and open to exploitation. How do you prove how many hours you do? Own businesses would make it their hours up accordingly. Even big companies could work it so that you end up with more money in your pocket than them paying you.

So, lovely idea, but won't work.

So the first (for example) £8 earnt each hour is tax free, then 20% tax is paid on the next £10, then 40% on the next £15, and 45% on anything over that.
Hourly paid workers pay slips already have an hourly rate and number of hours on so for these the admin should be no more than under the current system (and for employees whose hours vary should actually be less as the tax per hour stays the same at all number of hours). For salaried workers companies would have to declare what proportion of full time the employee works on the payslip and for salaried workers the tax bands for monthly earnings would be worked out by multiplying the hourly tax band by 2080 and then by the proportion of full time the employee works. For example for someone working 0.6 of full time the tax free allowance would be £9984 if the hourly tax free allowance was £8.

Lots of people don't earn an hourly rate, they earn a salary and work what's needed to get the job done regardless of contracted hours, when you take any job, you work out your commute costs, childcare etc and whether the job is viable. Egg I live not far from London, I could probably earn more commuting into the city, but not when I take into account travel time and additional costs, that's me working out my own budget and nothing to do with tax.

So op, I own my own business. What stops me saying I worked 8 hours today rather than the 1 hour I actually did?

Salaried staff is also completely unworkable. Some days I work 9-5, some days I'm there till 10pm if there's stuff to do. Might as well just say I'm always there till 10.

As somebody who works 20 hours a week, your plan would thoroughly shaft me. As well as everyone else who wants to take part time or flexible working, like the parents this forum is for.

This system would just be for earnt income (with pensioners being treated as working full time). Unearnt income such as property rentals, dividends and non-isa interest would be taxed separately at 45% on the basis that these forms of income are unavailable to the vast majority of people who are not paying the higher rate of income tax and are rarely used for day-to-day expenditure. The only exception would be on rental income or interest from the rental or monies acquired from the sale of a persons former main residence upon moving to a care home which would be untaxed on the basis of them likely to be needed to pay for care.

I pay tax on my pensions. Some people's income is from buy to let. How would our tax be worked out?

Also, freelance and contract workers get screwed over. They might be working full time for a few months then have periods out of work, which you propose to trip them of their tax-free allowance for.

Pensioners and full time salaried staff would be based upon 40 hours a week, with part time salaried staff being based upon 40*%FTE.

Someone working 20 hours over 5 days has same commuter costs, same childcare costs (unless children in school, you can't pay for part of a day at nursery!) Etc.

Being freelance is a choice that means you typically get a higher rate while in work at the expense of job security. There is no reason why the government shouldn't benefit from the higher hourly rate through increased tax.

What a cock eyed idea.

Some people have no commuting/nursery costs regardless of number of hours worked.

Some people work 37 hours f/t. Actually I wouldn't mind as using your figures I'd get another £5k a year tax free, which would be very nice for me, not so good for the Treasury.

Full time for many hourly employees is usually 37.5 hours per week with a 30 minutes unpaid lunch break so this 40 hours a week idea won't work for them.

I'm guessing your idea comes from being bitter you or your partner pay the same in taxes working full time as the part timers you work with.

A bad solution to a non problem

This. Sounds like an administrative nightmare and some of the issues you mention are dealt with anyway, eg tax free childcare or childcare vouchers.

Plus, commuting and childcare costs are not always related to time worked, eg people who walk to work or work from home, or don't have DCs or their DCs are old enough to not need childcare, or they get free childcare from relatives or have a SAHP.

Problem when you are HM Forces for example, and deployed or at sea, so your F/T is in excess of 60 hours a week, and you are exempt from the working time directive. Do you get an increased tax allowance because of that?

My conditioned hours are 42hrs a week and I have a 15 minute walk to work. Should I pay more or less tax than my colleague on the same hours and salary who has a 40 minute train journey each way ? Far to many assumptions to be remotely workable.

arethereanyleftatall

It's completely unfair that the person on a board doing two meeting a year for £20k is taxed the same as minimum wage x 60 hour weeks (or whatever is works out)

Only if the Director only has that single income, if they do five directorships at 20k each plus 10k misc consulting income they'd be taxed as if they had a 110k salary. Few people doing a few days a year as a director will be doing just that.

There is often a very good reason why some jobs are paid more per hour than others. Usually people in those jobs have qualifications which take time and money to achieve. Those jobs usually come with greater responsibility, requiring longer 'unpaid' hours, being on call, requirements to work unsociable hours, working from home.

How is it fair they pay so much more tax proportional to what they earn?

As others have pointed out many jobs have official full time hours (mine is 37) but the job actually takes many more hours to get the jobs done (on average I work 45 hours per week but it's not that uncommon to work as many as 60 hours per week). Why should I pay potentially more tax than someone earning the same as me working the same hours but they are paid per hour worked but at a lower hourly rate than my official hourly rate?

This scheme is not well thought through by someone who doesn't understand the many very complex way people earn their money.

And to assume only higher rate tax payer will earn money from investments, rental etc is insane! I know many people who are still well within the basic 20% and have a rental property (for example when two people get together and both own a property).

I work part time due to disability. I'm not 'disabled enough' for PIP and now you want to take away some of my personal allowance because you don't think I've worked as hard as you? I can assure you I have to work bloody hard.