To think that the tax system for lower earners is ridiculous...

[Startingagainandagain]

I was thinking about that this morning after the organisation I work for announced pay rises levels for this year.

I am disabled, work part-time because of it (so no choice) and don't claim any benefits.

My pay rise is 4.6 % which sounds great but equals to very little extra each month once tax/national insurance is taken out...I will be maybe £20 better off.

There are many people in the organisation who make less than I do (my salary is around 26.8K which for a part-time role is not bad and will go up with the pay rise)

Am I wrong in thinking that the tax burden should not be that high on people who bring that sort of salaries home?

It seems to me that the tax system is hammering the lower paid and brings a vicious circle of people then having to claim benefits, even if they have a job, to have any kind of decent life.

Do we think the next government should address this?

What would be an appropriate amount of tax for someone on around £27k to pay?

I think your calculations are off - I make you about £75 a month better off (or did you mean £20 a week).

I agree with your wider point though I think the way tax interacts with benefits is really stupid. We need to ensure people are keeping enough of their wages to live on rather than taking with one hand and then giving back in the form of complex entitlements.

What do you suggest happens instead?

You’re complaining that the increase in salary equals to very little extra each month once tax/national insurance is taken out...

The same is happening to everyone earning more than you.

But the entitlements are according to need.

I know there are flaws in the whole tax and benefits system, but at least it's progressive in the percentage you pay in tax is lower if you earn less (for the OP it's only going to be about 10-15% overall, which suggests that her argument doesn't stack up anyway) and then people with higher needs due to disabilities, DC or rental costs are entitled to benefits that people who are healthy, childfree and/or have a mortgage do not.

Without these 'adjustments' you'd either have to pay everyone much more to increase pay to what a family who rent and have DC/disabilities need to live on, or you'd have to have illegal pay discrimination according to (perceived) need so we'd be back to the bad old days where men who have a family to support are openly paid more than women who are often seen to be just working for pocket money.

My rough estimate , assuming you contribute 5% to your pension, is that you'll be around £16 per week better off.

Someone on £55k receiving the same £100 per month rise would be only £13 per week better off.

Someone on £100k receiving the same £100 per month rise would be only £9.40 per week better off.

You're £75 a month better off, I dont think you're being hammered for tax. People earning over £50k are being hammered for tax.

Try paying 62% of your income as tax OP, which is what I pay on part of my income.

You think the low paid are being hammered for tax. High earners think they are being hammered for tax. That’s fair, isn’t it?

The truth is that we need to pay more tax to have good public services. If you look to the differences between our tax system and those throughout Europe, their tax take is more as their basic rate of tax is higher than ours. Their low earners pay more tax than we do, giving the government more money to spend on services. Other Europeans have higher wages as their productivity is higher, and not many places have the housing strain that we in the UK do so they are better off in other ways.

The tax burden is not very high on low earners tbh.

You are paying a marginal tax rate of 13.8% (income tax + NI) on a salary of £26,800.

If you earned £200k, your marginal rate would be 38.8%.

OP I think the biggest problem is the freeze on the lower threshold for tax, that hasn’t been increased with inflation which means a bigger portion of your salary is subject to tax. To be fair that’s the same for middle income too but when you are on low pay, it’s a stark fact that tax has increased stealthily.

The problem isn’t just about how much or how little you are better off following a pay rise - it’s also the overall picture that lower earners experience a bigger impact from cost inflation compared to higher earners . And you’re less likely to benefit from savings income as your savings are lower/non existent whilst simultaneously may be suffering due to higher rates of interest in debt. And perhaps you have less capacity to “trim” your outgoings due to having few luxury purchases like holidays or take always.

I think you feel more sharply the sting of your pay rise not turning into much cash in your pocket.

I am very sympathetic and wish the country could afford to make tax fairer but it would mean a seismic change and there’s no government plan to do that.

A 4.6% payrise is decent and a lot more than what most people get
Also if £26800 is your current salary then payrise is equal to £1232 pm
Even if your deductions were at 50% which they clearly won't be it'd still be £51pm so no idea where you've got £20 from

Surely you’re about £74 a month better off?

''@mathsquestions
You’re complaining that the increase in salary equals to very little extra each month once tax/national insurance is taken out...

The same is happening to everyone earning more than you.''

Come on. You know exactly what I mean...

If you earn 15k, 20k every penny counts and you are left with very little income after tax.

If you earn 40/50 60K and over you will still be left with enough on that salary to live comfortably even after you have paid your taxes/NI.

Don't be disingenuous.

@SpringKitten

'OP I think the biggest problem is the freeze on the lower threshold for tax, that hasn’t been increased with inflation which means a bigger portion of your salary is subject to tax. To be fair that’s the same for middle income too but when you are on low pay, it’s a stark fact that tax has increased stealthily.'

Exactly.

Thank you for expressing this so much better than I did!

I think the tax system is most flawed to those above the 50k bracket. At least lower earners are entitled to benefits.

So what percentage would you expect the £26-60K earners to be taxed?

It's not a good idea to tax income from work more highly than other sources of income in general.

Not necessarily true - some lower earners (those you seem to dismiss as earning less than £50K) are not and never will be entitled to benefits which are largely aimed at couples and families

I think I get the point the OP is making.
Part of the unfairness is because the 4.9% rise is expressed as a percentage so those earning larger amounts get a bigger increase.

The state pension increase (yes the 'triple lock') is always expressed as a percentage but those by virtue of being the older cohort are on a much lower (£156 pw!) basic pension a percentage increase is much less than the younger cohort on £205 per week but they have the same increased costs. Note the higher rate is always quoted by the media!

OP I earn 3.5 times as much as you but pay nearly 10 times as much tax and NI. Hope you don’t feel too hard done by now.

You are not a high earner, nor do you pay high amounts of tax. HTH

'@RichTea90
I think the tax system is most flawed to those above the 50k bracket. At least lower earners are entitled to benefits.'

I don't claim any benefit...

I also don't see the logic of having to rely on benefits (which is taxpayer money) if you are working.

It would be fairer to look at the tax thresholds/rates so that people on lower income can keep more of their salary so they don't have to rely on benefits.

Also if you earn over 50K, when the average salary in the UK was 35k in 2023, by the way you have little to complain about.

Quite sad to see that there is a lot of 'what about the high earners' on this thread...

''@Dibblydoodahdah · Today 14:10
OP I earn 3.5 times as much as you but pay nearly 10 times as much tax and NI. Hope you don’t feel too hard done by now.''

Whatever happened to logic/common sense in this country...

The point is people on low income after tax have little left to live on.

Higher earners will still have more than enough left for a good life/saving after they pay tax/NI

It really is not that hard to grasp.

On your salary of £26,800 how much do you pay in tax and NI?

The current tax system feels like it’s hammering everyone.

The issue is - if those on ~£27k salaries are deemed to be paying too much, who should be paying more?

Someone earning over £50k with a student loan has >50% of every penny earned taken through PAYE now. That’s quite significant given in parts of the country you’d struggle to raise a family on this - even rent your own flat.

IMO we need be addressing how to tackle wealth inequality rather than focusing exclusively on income all the time.