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?

Even if ideologically ‘fair’, what good is that ideologically if, instead of not actually improving things, it makes things worse?

Despite those saying ‘they don’t leave! They say that but they never do!’, higher rate tax payers are, and have been, actively leaving. The UK has the third highest rate of wealth migration in the world, and those individuals (and the business they take with them) are not being replaced.

https://spearswms.com/wealth/millionaires-leaving-uk-wealth-exodus-migration-brexit-non-dom-debate-henley-global/

No, it isn’t sustainable.

Also, compared to other European countries we actually don't have a high tax rate.

The top tax rate in the U.K. is 45%

France has 55%
Austria has 55%
Denmark has 55%

The average top rate tax in Europe is 42%

So if the rest of Europe can sustain it I don't see why the U.K. can't

taxfoundation.org/data/all/eu/top-personal-income-tax-rates-europe-2024/

@Reugny it wouldn't be easy to set up a tax on assets, no, but it should be possible, but the political will isn't there to do it. I wonder why...

Most very high rate tax payers can move and many we know are actively considering it.

Ta ra! - don't bang the door on your way out.

This statement is often trotted out as why city bankers and CEOs need massive bonuses even when their company is doing poorly. Latest water bill up anyone?

Along with 'trickle down economics' it's all total bollocks. What's definitely true though, is the rich continue to get richer, and the poor - not so much.

Ofc if minimum wage was higher and other jobs just above it has kept pace with inflation these last 14 years we'd be getting a lot more income tax from more people.

@Octavia64 well said and of course it's sustainable.

Look at the tax competitiveness index:

https://taxfoundation.org/research/all/global/2023-international-tax-competitiveness-index/

and the UK profile:

Strengths:
The UK provides full expensing for business investments in machinery and above-average cost recovery for investments in intangible assets.
The UK has a territorial tax system exempting both foreign dividend and capital gains income without any country limitations.
The UK tax treaty network with 130 countries is the broadest in the OECD.

Weaknesses:
The top personal income tax rate on dividends is 39.35 percent, well above the OECD average (24.2 percent).
The real property tax burden is among the highest in the OECD.
The VAT at a rate of 20 percent applies to less than half of the potential consumption tax base.

https://taxfoundation.org/location/united-kingdom/

How many indirect taxes e.g. council tax do they pay?

And what goods and services do they pay VAT (or the equivalent) on? What is their VAT (or equivalent) rate?

It’s currently sustainable for those middle aged and homeowners. It is completely unsustainable for the younger generation. What is more the biggest companies are now having to pay the young talented ludicrous salaries to make up for this.

The issue is not PAYE. The issue is housing costs. Within housing, the main problem is planning departments are far too slow and ineffective. They need to urgently open up planning departments, staff them properly and get building and get a whole lot of youngsters into the building trade.

Taxing income is stupid, other than a basic rate. People should not be disincentivised to work hard, to spend money and live in the UK.
Tax wealth instead.

Agreed. I'm apparently just on the top 5% FTE in my 30s but housing costs are so high I have to have a massive mortgage to have a small house (rent would be higher) and my childcare bill takes the rest. If I earnt any more I'd hit the £100k cliff and be in the red every month so I've dropped my hours and pay less tax. Tell me that's a system that works.

I really, really struggle with this sort of thing. Surely the sorts of people you mention have enough to afford to live where they want, as opposed to where they pay less tax being the top reason, pay their taxes, and still probably have more money than they can spend. I would have thought that wealth would afford you the freedom to live somewhere you actually want to.

An issue that would get worse and worse the more we get lower skills and poor people coming here. More people more need to pay for services. So we would never catch up with housing and services. It is also about how we spend the taxes money. We are off as we can’t longer have a good quality of life. And yes you all want me to go and my ass would be hit by the door on the way out. However, good luck to you all!

But the rich will be paying the max yearly into their pensions. It was 40k. So maybe 10k of tax added to pension. And lots not paying tax on. Yes possibky pay it when withdrawing from pension.

I agree with this.
Most people live in communities and have extended family, they are connected to their society, churches, hobbies, culture, food etc etc.
The super wealthy drift around the world on a whim, but the rest of us generally don't.
I know a few people who have ended up in UAE etc because the money is so great and taxation is so low. Their lives sound absolutely awful to me, they are cut off from culture and the world, just socially with others who are carbon copies, they have no conversation other than to talk about their children's expensive schooling, problems with the air-con, and issues with the maids.

I think the only fair way is to include all forms of income as taxable at similar rates, it is ludicrous that multi millionaires end up paying %less than income from working if theirs is from capital gains, dividends, and the like.

Isn’t it strange that such legalised ‘tax planning’ is ok whereas if someone dares not take additional hours, or whatever is criticised…

If you can afford to stick more than the average uk salary in a pension pot you can afford to pay your taxes!

Also, doesn’t NI drop or stop after a certain point, so higher earners reduce proportionately what they contribute.

Also shows that a huge number of people return to their home country within a few short years of their big flouncy move.

I lived and worked in the EU 1989-1991 and didn’t need anything outside of my work visa.

We lived out of the UK 1999-2016 in 3 other countries and paid a flat rate of 12-15% income tax.

We came back here to put down roots for our DC and put them through a good UK private school. Once they are all at Uni there’s no financial reason to stay here, and the quality of life here is pretty crap TBH.

I moved overseas for work. I could work for the same company doing the same work in the UK but I don't. I would pay well over 100k in tax in the UK but don't, my clients are all overseas so can work with them just as well here. If taxes were lower then I would be in the UK. It's not a 500 a month difference, a small tax rise might be 500 a month but in total the difference is huge.

I currently spend money here instead of the UK. I work with many other people from the UK who could be in the UK paying tax in the UK.

I think if the guys in my office were back in the UK that would be another 10m a year income tax in the UK and corporation tax on top (possibly another 3-4m) plus what we would spend and all the VAT on that. Thats lost to the UK because tax is already too high. The direct tax loss is circa 15m a year and the economic loss is probably over 50m a year - just from people in my office.

Even more unsustainable, is Britain's overseas recruitment drive for net tax recipients e.g. carers and hospital staff on low salaries. We are deliberately increasing our population with no means of financially sustaining it.
The system is broken but has been for centuries. A large percentage of the country's wealth came from ripping off the countries we invaded, such as India. We drained their wealth and we were so proud of ourselves for doing so well but now that wealth and our first mover advantage has run out and it turns out that lots of us aren't great at paying our own way, are badly educated and quite often significantly lazier with a more entitled attitude than many people in other countries.
The UK is not "on the up" for swathes of the population.

I agree is not sustainable, high earners should pay higher taxes but not 60%. I think wealth should be taxed though in some shape or form.

There are issues with ensuing the tax base is broad enough but VAT on private schools is an odd one to choose to illustrate your point. VAT is a consumption tax not an income or wealth tax and about a broad a tax as you can get - some of the poorest people in the country will pay VAT.

I mean I had to stump up VAT on the cost of some essential plumbing work recently so not really crying about people having to pay it on private school fees.

My view is we rely on taxing income too much and assests/capital too little and that is where we need to look to broaden tax base.
.

If people that pay tax in the UK and are net tax contributors leave then it's a loss to the UK economy and reduces the amount of tax paid.

If you replace them with people that don't pay taxes and actually cost the government money to keep (house, feed, clothes, NHS, educate, translate) then the government has more costs.

The UK has an immigration system currently where taxpayers leave and are replaced people that not only don't pay tax but actually cost the state more money. It's insane.

On top of this insanity you have 6.3m people on working age disability benefits - if they are unemployed call them unemployed, there cannot be 15% of working age people that are disabled.

Immigrants to the UK as a group pay more in tax than they use in services.

iasservices.org.uk/the-effect-of-immigration-on-the-uk-economy/#:~:text=Non%2DEEA%20nationals%20paid%20£,citizens%20working%20in%20the%20U.K.

This is at least partly because some of them are working age and come here for a few years to work but leave and so we didn't educate them, we didn't educate their children, and they leave before they need elderly care.

I agree there is a massive brain drain out of young & talented people now due to the tax system and high housing costs. Old rich people need to start paying their way more, but all our politicians are essentially cowards. Unfortunately the NHS in its current form and the benefits system is not sustainable. It should be means tested, of better quality etc. And people need to plan for their old age care too and pay into an insurance system from early on. It is great we can all live longer and that medicine has evolved, but we cannot keep our systems the way they are anymore.