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?

Not worked in many companies have you? This is EXACTLY what one employer I was at did!

We have one of the highest tax free allowances in Europe, and the highest NMW. It's complicated, there is a very fine balance to be had between fairness in tax and provision of services for all. If you want equality go for flat tax, for everyone. The argument is you get more tax, as no-one avoids it, and there is more buy in frim all levels of society if everyone contributes something.

I love how people claim that something is 'always like X' when they couldn't possibly know that (you know how every single company in the country decides it's payrise? Really) and it is something they are wrong about.

Plenty of professionals in the stats.
Professional, technical and scientific sector had as many on furlough as did the Entertainment, Arts & Recreation sector.

Exactly.

I earn 47k a year, and it barely goes anywhere once you factor in high mortgage costs (I live in the SE), bills and cost of living. It’s not a high wage at all, and no benefits or other forms of income. OP’s salary increase was good to be fair, ours was only 3%…

Well, I think OP would not have complained as she did about the unfairness if her company was doing it like that.

A flat tax would be regressive.

I earn the same as you as a part time teacher, and think the tax system is fair.

10% of the UK population already pay 60% of the tax bill.

Half of families in the UK take more OUT of the benefits system than they pay in nowadays.

I would like to see more support given to families that want to work but don't earn enough compared to the cost of childcare, particularly at the moment when you have 2 children under 3.

The tax thresholds which sets the level at which tax is paid have not changed for years. It means that there has by stealth in real terms been a tax increase which affects those on lower incomes more than those on high incomes.
Yanbu

That's why you get a tax allowance and higher earners pay more tax too. If you haven't enough money, then get a better job.

Yes, really. That’s how the tax system works? People earning less pay a lower percentage of their earnings. And in this country lower earners pay far less tax than in many other European countries. The real craziness in the system is the tax cliff edges. The Government did at least try to resolve the £50k child benefit cliff-edge to a certain extent in the last budget but the £100k cliff-edge is pure stupidity and stagnates growth. Like many people I see little point in going for a promotion or new job to take me over the £100k in order to pay 60% tax.

I think it’s how the tax system is supposed to work…lower earners paying a lower effective % tax rate compared to higher earners.

The reality is quite different though because higher earners can put money into tax sheltered sources of income. It’s closer to a regressive flat tax.

For example, last year prime minister Sunak published his taxes. It showed that he paid a tax bill of £508,308 in the financial year 2022-23 on overall earnings and gains of £2.23m.

This means he paid an effective tax rate of 23% in the UK – much lower than the top rate of 45%

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.

It's even more noticeable for working pensioners. We don't pay NI, so no reduction to offset the freezing of allowances.

My part time earnings are around £1200 a month gross. We got a paltry 3% pay rise, and I ended up £9 a month better off. The pension increase and freezing of personal allowances mean that I pay tax on more of my earnings, so I don't get the full benefit of the £18pw or so increase in my state pension.

I couldn't tell you the last time our "essential user" car allowance went up, and mileage rates have been unchanged for longer than I can remember.

That’s because dividends and capital gains aren’t taxed at income tax rates, something Labour have said they are not going to change alas.

But your income is taxed after the personal allowance at 20%, just like any other UK resident. I really don’t see what the problem with that is.

Every penny counts at all salaries. Id argue at 40k plus (when benefit entitlement stops) it is even more galling to pay higher levels of tax.

That isn't a difference between higher and lower earners. If you're on PAYE, you're paying the applicable rate of tax upfront whether you're earning £20k or £200k.

The lower effective tax rate kicks in when income is based on interest and dividend payments (i.e. passive income from wealth) rather than anything earned through a job.

What’s your alternative? The tax burden is already the opposite of what you think it is, I can’t remember the exact stats but it’s something like 10% of people pay between 60-70% of the tax receipts value. The only (in theory) “fair” tax system is everyone oats the same percentage but then you’d a lot more.

I suggest your actual issue is you believe lower paid people should receive a higher % salary increase than higher paid people, which is something to take up with your employer.

I think OP thinks that life is terribly hard in the USk on a low salary which it no doubt is, but life is also pretty crappy at all salary levels. Costs have gone up a lot recently and salaries haven’t so everyone feels very squeezed.

Sorry OP but at £28k for part time you’re not a low earner.

£28-30k is AVERAGE for full time.

A pensioner on the old state pension who doesn't have any other income will get it made up to £218 pw with pension credit though, so will end up only £3pw worse off than a younger pensioner on the new rate of £221.

Yes OP it is ridiculous. UK minimum wage annualised is £20,820. Why on earth would someone on minimum wage pay income tax, then possibly need to receive top-up benefits? What an ass-about-face situation. Just allow work to pay and let them keep their own cash!

As others have pointed out, earnings and prices have increased, but tax thresholds have remained static. Freezing thresholds is an astute political way of increasing tax as people don't really understand it as a whole, and it doesn't grab headlines like a rise in the headline rate. But it hammers you over the course of a few years. IHT has remained static also, assuming you don't leave a property to a direct descendent, the threshold is £325,000, same as it was 15 years ago. £325,000 now is not the same as £325,000 15 years ago. Be open about it!

There are other ridiculous quirks. The erosion of the personal allowance between £100k and £125k leading to an effective 60% tax rate for some. National insurance (Its a tax, not a pension contribution) means that earned income is taxed at a much greater rate than investment and pension income, when, if anything, it should be the other way around! Capital Gains Tax threshold is now £3,000 meaning that even minimal gains are taxed. yet for basic rate tax payers the tax is half that of income tax.

In Ireland the public sector pay rise was a percentage or a fixed sum or 1500, which ever was the higher. So 5 percent for 50k earners was 2.5k but for 25k earners it was not 1250 but 1500 and 20k earners not 1k but 1.5K. This seems a better way of doing pay rises, as perc pay just increases the gaps between low and high.

Errrr - I don’t think you can say you are worse off because your NI hasn’t been reduced. That’s because you don’t pay it - you’re already better off.

I think the tax is fine, everyone should pay towards society and those on higher salaries do pay more % in tax ready. I agree though that % salary rises mean lower earners get less and that’s not really fair, but that’s up to companies to sort out not the government, although they should mandate a set amount rise rather than % for public sector jobs. I would be happy for my company to give a set amount like £2k to everyone, would mean I get less but it’s fairer. I would not however be happy to be taxed more so lower earners get a tax cut.