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?

Higher tax payers aren’t that mobile!!! I am one and it’s never occurred to me to move country to pay less tax - I’d rather see my parents and have access to education and healthcare that I actually understand! Such scaremongering - I know very few people who have moved abroad permanently for purely financial reasons.

Why is the focus continually on individuals and not on vast corporations that headquarter themselves outside UK so they are minimally taxed on UK income?

Yes, the uber wealthy billionaires need to pay their share. We all do. But those enormous businesses are making huge profits and giving their big shareholders additional income. And so the cycle continues. The wealth accumulates in a tiny, tiny proportion of the population.

Meanwhile the rest of us are squabbling over a far smaller divide between the truly impoverished and those who earn enough to be comfortable in retirement but not living the high life. I put myself firmly in the latter category, with an income that puts me in the tax 'pain zone' and therefore adding to my pension as much as I can. I am comfortable, not complaining, but far from the jetset life that people seem to imagine. I pay more in tax than the median gross income, and I do see that I am in a place of privilege. But I should not be public enemy no.1 for that.

“Why is the focus continually on individuals and not on vast corporations that headquarter themselves outside UK so they are minimally taxed on UK income?”

Because for anything to change you need international consensus first. If there is always another country offering a lower rate, they will go there and you will lose jobs.
Also due to the tech boom our Governments have less power and cash than some billionaires. So the balance has changed. We are essentially somewhat at their mercy. What we need is international cooperation and consensus. However, in the real world there are actual wars including information wars going on all the time. So there is no consensus. Just everyone looking out for themselves.

I don’t understand your point - you don’t pay any tax at all but are mad that people who earn the vast majority of the wealth in the country have to pay tax? If you’re on that small of a salary you’re paying no tax at all, how are you able to send DC to private school?

Or do you mean your DP is funding your lifestyle while you make peanuts and you think that gives you reign to judge the tax situations? Or did you just want to gloat about how you get around paying tax?

I’m pretty sure it’s just people whose jobs it is to chuck ‘what about this’ topics into MN to either gauge opinion or stoke the fires, given there’s an election in a month. There’s loads of them at the minute

Or do you mean your DP is funding your lifestyle while you make peanuts and you think that gives you reign to judge the tax situations?

Thanks, but I worked 6 days a week for 17 years overseas in a very stressful environment and saved as much money as I could. I don’t need to work f/t now. No one is funding my lifestyle.

The top 10% band largely just pay their tax- it's people earning £66,000 and above.

If the top 0.1% would just pay their fucking tax we would have a lot more to play with.

What it shows to me is so many people earn hardly anything. And that lots of the mega wealthy make money from investments, not from making anything or contributing to society. If investments were taxed like income that would actually help a fair bit. However, we need global taxation agreements so people can't just hide their money.

I see it on a societal level, do those people who "earn" moving to Dubai money to avoid tax really do jobs that benefit society or are they just people who move money around, I imagine if they can just move to Dubai they don't actually benefit our society in the first place. Let them leave. Do they really think they are worth 20x more than a paediatric nurse or careworker. They have some bloody gall to moan about tax when they get paid shitloads, usually at the expense of average peoples wages who actually keep their businesses running.

The top 10% also have 43% of the top wealth so its not that surprising they pay a high proportion of the tax. If we had a more equal society then the top 10% would pay a lot less.

What you really mean is its ok for higher rate tax payers to avoid paying tax and claim benefits ( CB) via loopholes but when poor people try to avoid paying extra tax they are work shy lazy articles who should suck it up and be grateful.

Weaknesses:
The top personal income tax rate on dividends is 39.35 percent, well above the OECD average (24.2 percent).

Then the OECS average is way too low. Dividends should be taxed at the same rate as higher income (45%), if not more. At present, if you actually work for your money you get taxed more than if you have cash to spare for 'investing' and get then paid for just owning investments!!!

The real property tax burden is among the highest in the OECD.

Ownership of land or property should be taxed more than employment. Again, if you are wealthy enough to own stuff you should be forced to pay more tax on it, to redistribute the wealth.

The VAT at a rate of 20 percent applies to less than half of the potential consumption tax base.

VAT is an extremely regressive tax as the poor pay just as much tax on buying an item or service as rich people do. It should be abolished in favour of energy taxes - if an item uses a lot of energy (i.e. fossil fuels) to make or transport, the taxes should reflect the destruction of the planet inherent in that item's existence.

In short, tax wealth more than income, tax energy use instead of business transactions, and also abolish employers VAT which is a tax on job creation.

Like it or not t’s those low averages that are attracting wealth. The UK isn’t, and that’s the problem*. If the UK wants to attract it and turn the current tide, then it needs to be pragmatic. I personally see little point in ideological purity if the result is an increasingly poor situation.

*and it is a problem, regardless of whether anyone spouting the ‘fuck off then!’ line cares to admit it or or not. Those leaving are and will be just fine, because they’re not the ones having to shoulder an ever increasing tax burden.

Maybe someone could start up a charity to help these poor struggling rich people.

@Yetmorebeanstocount

"Then the OECS average is way too low. Dividends should be taxed at the same rate as higher income (45%), if not more. At present, if you actually work for your money you get taxed more than if you have cash to spare for 'investing' and get then paid for just owning investments!!"

It's a basic economic principle that the higher the risk then the higher the reward.

Dividends on an investment are and should be taxed at a lower rate than income because the investment takes a risk.

For example if you work for your income in a salaried job and say the company goes bust then you lose your job and your income. It may take up to a year to find another job, but you are still able to start again.

However if you invest say a £100k into a business and it goes out then you lose your job, your dividend income and most importantly the £100k. Whilst you may be able to get another job after a while, you cannot ever get that £100k back.

@InterIgnis

"It should be abolished in favour of energy taxes - if an item uses a lot of energy (i.e. fossil fuels) to make or transport, the taxes should reflect the destruction of the planet inherent in that item's existence."

The UK already has one of the most expensive energy costs and all that will happen is that energy intensive industries (cement, steel, data centres) will relocate to countries with cheaper energy costs, costing jobs.

Glanced at the link from a highly biased source but if you are including tourists as immigrants per that study then it's not a credible source.

I dont know if the top 10% of earners paying 60% of income tax is sustainable.

One key thing is what percent of earning do the top ten percent earn. If they are earning most if the total income it's not a surprise they pay most of the income tax.

It's clear though that a lot if the uk is low wage so if we had better jobs there would be more tax raised. We need to be more productive too.

A lot of the problem is successive governments encouraging and incentivising people not to pay tax. I.e. raising the tax free personal allowance higher than inflation/earnings in some years, increasing ISA allowances, introducing zero rate bands for interest and dividends, personal savings allowance, pension contribution tax relief, etc. It's all giving the impression that people can avoid paying tax, in fact they're encouraged not to pay tax.

Nothing at all wrong with ISAs when the limit was £3k as that was achievable and aspirational for low earners to save a bit out of their wages, but now the limits are much higher and we have rich people shovelling money in by transferring from their other non ISA savings/investments and building up tax free ISA funds of hundreds of thousands of pounds. It's completely the opposite of the intent when it was first set up.

Same with pension contributions - yes, low/average earners need a bit of a "nudge" to make contributions, but we've again got pretty rich people, very high earners, shovelling £40k per year in (again often from savings), to get the 40% tax relief (and higher if they're at the cliff edges where margin tax is 62% or to keep free childcare etc).

I think Gordon Brown had the right idea 20+ years ago when he introduced the lower 10% rate of income tax - that would have been "affordable" but still sent the strong message that even lower earners need to pay "something".

Because of the increase in personal allowance and all the other zero rate bands for dividends, interest, ISAs, etc., there are ever increasing numbers of people who aren't paying tax on their investments/savings. Personally, I think there needs to be caps to stop relatively large amounts of investments/savings from being tax free - get back to what the allowances/incentives were aimed at in the first place which is to encourage people with lower/average incomes to get into the habit of saving!

Another angle, though, is people working less, i.e. working part time, reducing their hours, etc., to either avoid paying tax at all, or to reduce the marginal tax rate (and increase benefits) by working less. It's not all about low wages, it's also about people on higher wages "choosing" to work less and thus paying less tax. Both are damaging to the UK economy!

If we're going to make it more difficult for people to get tax relief on pension payments, we really need to fix the cliff edges and bottlenecks. Because the other alternative is people just working a bit less.

The rich work just as hard as the poor - the only difference is that more of it is stolen by the government and wasted

Haven’t read the whole thread, but if you’re not a tax payer you shouldn’t get tax relief on your pension contributions.

I'm in the top 10% and got taxed a third of my gross salary for 2023/2024, but I still think it's a fair deal considering I'm able to pay my bills and still save month on month. Like PPs, the only element that pisses me off is how inefficiently my tax is being used.

I think Capital Gains tax should be higher than what it currently is - a lot of high net worth individuals aren't gaining their wealth through a 'job' so much as through their assets, so Capital Gains through investments should at least match the rates that PAYE workers are having to dish out.

Whilst I'm on my soapbox, I'll also add that I believe stamp duty should be substantially less or even abolished for people moving from their main residence into another main residence - the housing ladder is essentially broken because so many households can't afford to pay stamp duty on a move.

Perhaps a better question is whether over half of all UK households (53.%) receiving more benefits and services against ALL taxes paid is sustainable? (Especially given how our National Debt keeps growing).

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/previousReleases?page=1