Top 10% of taxpayers paying 60% total income tax - unsustainable?

[ElizaDoolittleAndOften]

There has been loads of debate on here lately about private schools, and people paying their fair share of tax etc. It all got a bit heated. Whether or not you think people who earn a lot should pay a lot of tax is down to you, but my question is;

Is it sustainable in this country for 10% of income taxpayers with the largest incomes to amount to over 60% of the total income tax pot?

Just to note that these top 10% are not all the millionaires and billionaires in the country. I believe the only one to own up and pay up is Sir Alan Sugar.

The reason why I am asking this is because I think I am in a unique position. I am from a very WC background, yet now am able to send my DC to a private school. There is a lot of tax coming out of my house. Within my immediate and extended family we have someone worth £12m (not me), and others who refuse to work and claim every benefit they can, and work on the side. I’ve seen it all.

Over the past few months I have seen people on here irate that people who earn lots need to pay more tax and I saw people on here responding that they are sick of paying for everyone else.

Then something happened at my own work. I work part-time. I don’t earn a lot. It was below the threshold of paying tax. Then we got a pay rise, and I was taxed £60 a month. Everyone around me went into a rage at being taxed more and started to do things like reduce their hours as it wasn’t worth the bother. Others had to adjust hours as it took them over the limit for tax credits. So, everyone begrudged handing over money in tax. They don’t think they should pay tax.

I looked into it for me. This is what I did. I got onto my company and increased my pension contributions, so now I pay £0 in tax because tax is based on income after pension contributions, and just under £5 a month in NI.
On top of this, the govt. tops up my £60 by 25%. So, I am now not a net contributor. I may pay tax on my future pension, but I can take out 25% tax free at some point, plus since this is an investment, it will appreciate in value. I am still a winner.

This just got me thinking. On one end I am getting told I am a tax avoider because I don’t want to pay VAT on my school fees, but at the other end of the spectrum I am able to shuffle some things around and not pay tax.

So, AIBU to think that it is not sustainable for the top 10% to pay 60% of the total pot, and in fact there are people on all levels that need to contribute more, or fairly, to have enough money to pay for all our services?

I have a friend who happily works part time, with Universal Credit topping up his income and being eligible for all kinds of discounts and funds. Don't think he's ever paid a penny of tax in his life and wonder how many others are taking without giving back

This

Tax avoidance/evasion is equivalent to benefit fraud in my book.

I believe at the moment Non Dom's pay £8.5 billion a year. It seems many of these are now in the process of moving to Italy or Greece on Golden Visas or Switzerland or Malta where taxes are much lower. I would not be surprised if Rachel Reeves ends up losing some of the £8.5 billion in revenue the government already gets. Same with those who sacrifice to send their DC to an independent school, often because they have special needs that can't be met properly in the state system. If many of these parents reluctantly move their DC back into the state sector and money she gains from VAT on fees and taking away charity status from the schools she'll end up losing having to accommodate a lot of DC with SN back into state system. There is a huge shortage of special schools so probably many of these DC will make their way back into.mai stream schools but can these schools cope with a new influx of DC with additional needs?

Good post and good point.

the top 10% paying 60% of the total feels ok to me. It doesn’t feel unsustainable or excessive, for the reasons many have stated. The top 10% have a lot more than 60% of the income and the wealth%

fwiw I’m in that group and feel I pay a reasonable level of tax. How it’s spent is a different argument…

Pay the higher earners less and give that money in wages to lower earners and then tax them.

My ex was a high earner while I was a childminder through Covid. My tax return that year was low enough I owed no tax but I had worked 7-6 5 days a week. Hard work with responsibility and no breaks. My ex worked less hours and got a lunch break. He has specialist knowledge so thinks he's worth it, maybe he is but could he be a carer or a hospital cleaner? It's always bothered me the lowest paid are often doing really hard jobs.

@Abstractthinking it's only "unfair" because income levels are so wildly unfair though. In the country where you pay 30% on everything with no threshold, is a single parent working full time on minimum wage able to comfortably afford a typical rent for a basic adequate home with all the reasonable minimum costs for food, bills etc covered from their take-home after tax? And do you have 30% of your income tax payers earning three times what someone on minimum wage would get or is income distributed more evenly too?

NO it isn't unfair.

Wealth is unevenly distributedThe wealthiest 10% are estimated to hold around 50% of all wealth.

I've no problem with people being uber rich so long as everyone in the food chain of their salary is paid well.

It's usually not the case though...

The one thing I always see on MN posts about how this or that service should be paid for answered by "well they should just tax the rich more " is that when asked to define who are the rich most reply anyone earning about 50% more than they do but most definitely not them!

Or in short other people's money but not their money.

You forgot the abolition of the 10% tax rate.

That was a mistake.

You need to be earning over 66k to be in the top 10% by income in the U.K. in 2023. That's just for people with full time jobs.

www.statista.com/statistics/416102/average-annual-gross-pay-percentiles-united-kingdom/#:~:text=Average%20annual%20earnings%20for%20full,the%20UK%202023%2C%20by%20percentile&text=In%202023%2C%20the%20average%20annual,bottom%20ten%20percent%20of%20earners.

It is really not possible that all of those people are going to relocate outside the country. Some sectors like finance and programming do have situations where it is quite easy to move but there's going to be a lot of headteachers and heads of midwifery in there as well who find it harder to move.

In addition, these days it is very hard to relocate outside the country. Getting a US Green card is hard and requires (officially) that you do a job that a US citizen doesn't want to do and they can't fill.

New Zealand and Australia have health and age restrictions.

My ExH worked in a global industry and we were offered international relocations a number of times. We didn't want to go to America (guns and their education system), Switzerland was a possibility and we do have friends there but you do really need to speak German/French/Romansch and their education system is tricky unless you use international schools which are insane prices.

We completely ruled out Dubai - didn't want our DD growing up in such a female unfriendly place and also honestly although there are a lot of private schools out there the quality of quite a lot of them wasn't great. There are now better ones.

This is the thing that will reduce tax take, not people moving overseas but people cutting hours for a better work life balance

Maybe we shouldn't be paying tax on income at all, but on assets. In particular empty property. There are lots of such buildings in London owned by foreign investors.

So many of my clients are moving to Dubai, especially at the prospect of labour. Not sure what the answer is but 'tax the rich' rhetoric leads us with 'not many people left to tax' problems.

I agree with a pp that the minimum wage should be increased incrementally as Working Tax Credits are reduced at the same rate until they can be entirely abolished.

Work should always be financially beneficial for those able to work.

For clarity the top 10% of income earners in the UK is anyone earning more than £59k per annum.

The top 5% is £87k a year and the top 1% is £181k per year.

I was looking at tax regimes in the rest of Europe, it's a bit tricky to generalise, as tax is complicated, but it seems that we already have one of the highest tax free bands in Europe, and beyond, and that in general, the pool of the income taxable is larger.

There is an argument for widening taxation in that if you paying for something and seeing the benefit, better schools and health provision, you value it more??

Actually, those paying this are on PAYE who are taxed in this way.

The self employed can fudge tax - pay dividend and corp tax or lend the money for property investment to reduce their tax burden - just found out about this today 😬

The rich pay tax consultants to hide money from the tax man. EG Rushi Sunak paid a lower % tax than I did last year and I'm not a multi millionaire.

Large companies operate to the letter and do everything they can to avoid paying tax, thats why tax on companies to get them to do the right thing works. Then you hear about Amazons deal of paying 1% corp tax. Wtaf. This is tax avoidance imo. It's outrageous.

Annually my micro business pays more in tax than some very large companies - 1 year I paid more than Barclays and Balfour Beatty Because apparently both companies lodt money - the same year I was unpaid by multiple clients but I could not declare that as losses.

The whole tax system needs rewriting.

But to your Q @ElizaDoolittleAndOften if you are employed and earn a big salary, c45% tax is acceptable, you still take home mega amounts.

@Greygreyhouse

and perhaps I will come back to the UK when I can get a GP appointment, my council isn’t bankrupt, the bin men aren’t striking and my child isn’t in a class of 32 (with two children attacking the others and distracting the learning who should be in a pupil referral unit but alas there are no places and no money for extra hands in mainstream )

This is the complete opposite of the life I live in the UK right now, maybe you just need to fine a better, more suitable area of the UK?
I got a GP Appointment, called at 8:45 yesterday and was seen at 3:20 yesterday afternoon for a kidney infection, also made DH an appointment while I was there for a dermatitis review - his appointment is on Monday morning first thing.
Our bins are collected weekly, fortnightly for recycling and this has never once not happened - definitely no strikes.
DS1 (7) is in a state school, with 1 form entry, class of 27. Ds2 (4) is starting reception at the same school in September, class of 26. The school has a specialist, separate hub for those who cannot be taught in lessons with other children, a total of around 8 children in this classroom at any one time.

Looks like where we are it's all working properly.

Just to note that these top 10% are not all the millionaires and billionaires in the country. I believe the only one to own up and pay up is Sir Alan Sugar.

He did try to avoid it but can't because he is in the HoL

https://www.thebureauinvestigates.com/stories/2023-09-09/revealed-lord-alan-sugar-attempted-to-dodge-186m-tax-bill/

@Almostwelsh

"Maybe we shouldn't be paying tax on income at all, but on assets"

I have some sympathy for the concept of moving the tax burden away from income and towards assets.

The counter argument is that you then might have little old ladies in million pound houses that are asset rich but income poor who couldn't afford to pay the tax. Of course they could always sell their assets...

The counter counter argument is you currently have a situation where you may have one income earner supporting a family of say four paying the same income tax as a single person. And of course the response is that they chose to have children...

That would take finding out who owned the property - normally an overseas company or trust - and trying to get money out of them. I know some councils have difficulty getting council tax from them.

It is actually far more common than you think for a company/trust to own property.

I know one of my next door neighbours' property is owned by one and friends realised they had sold their property to one. None of the properties are luxury they are just bog standard small house/flat.

I'm curious about how you want to address this OP?

If you want to make poorer people pay more tax, you're going to need to raise wages, which is one solution but probably not a solution that helps with economic growth. A lot of poor people (and some middle class people also) are struggling to make ends meet ATM: imposing a higher tax burden on these people would drive more of them into poverty. Is that what you want?

I tend to think a good solution might be to bring Capital Gains tax level with income tax, although this comes with some downsides also and would likely mostly be a tax on the rich.

I don't think it's sustainable for so much of the tax base to come from paid work full stop.

A narrow tax base is a bad thing for many reasons but not because it annoys high earners - but because wealth is too unevenly distributed which has many downsides for society and the cost of maintaining the welfare state.