To think this epitomises the squeezed middle - HMRC shitiness

[lurchersforever]

So the weekend before Christmas I have received the joyous news that I have not paid enough tax this year so my personal allowance for the rest of the tax year will be adjusted so I can pay it. This will wipe out the pay rise I have just received (it was the teachers' 5.5% and the first 3 months were pretty much wiped out anyway as they were received in a lump sum in November so taxed more, so that what I received for 3 months was the same as I what I got for one month this month). Next month I'l get nothing as a result of the unpaid tax. I am due another pay rise next month as will start a promoted role so I'll see what that brings but it won't be much as not a huge step up this time.

Next month my mortgage will go up £100 as I've had to renew for the first time since the rates rose (it could be worse) and I also have to pay back pretty much all my child benefit from last year which, as a single parent with an ex who pays nothing (I am with CMS - he's low income but owns a house outright and has money for stuff he wants) stings a lot.

I did exam marking in November, which nearly killed me in terms of workload, and got £630, which is £100 less than the tax I owe so is essentially wiped out by that.

I'm so fed up. I earn a salary that I never thought I would and would have thought if I did it would be great, but disposable income isn't that different from what it was pre-Covid as a result of col etc, but, worse than that, every time I do get a bit extra it's taken away. Enormous increases in workload and stress for next to nothing in the end. What is actually the point in working yourself into the ground for it just to be taken?

What's the point in that? Unless I can double my salary (never going to happen) there's no point in having further pay rises/doing exam marking as the majority of what I get will be taken. How is that fair?

Is it being taken because you owe tax, if so it won’t be like that once you’ve paid what’s outstanding. I do balk at paying 40% on my self employed earnings but I just make sure I charge appropriately for any consultancy work I do. I’m in Scotland so much higher taxes but it’s still worth my while to do extra bits.

I meant a tiny 5% rise from 40% to 45%.

I think what you’re experiencing is how discriminatory the tax system, including the child benefit repayment (yes it’s a higher limit now, but still works in the same way) is against sole parent families.

Id imagine that your salary would be considered a high salary as part of a two parent family, even if there was only one person working and the other was a SAHP (and therefore no childcare costs, taking time off work for appointments ect). However when you are both the sole financial provider and the full time parent, then for example a £50k salary is not that different to a two parent family where both are working full time in minimum wage.

Twice I’ve been told I owe money. Twice I have no idea why and no one could tell me, other than I had to pay. Once it was £1800 and once £400. I could understand if I’d been self employed with a variable income, but I had no additional income, nothing had changed.

Politicians have fiddled with various bits of the tax system and made a right mess of it, so there are various incomes now where the marginal rate of tax is very high. You're in one of them - where child benefit is withdrawn - but people earning less than you have an even higher marginal rate with the universal credit withdrawal, and people lucky enough to be earning more than 100K are hit by the withdrawal of the personal allowance.

The whole thing is a shambles and it discourages people from taking on extra work. Sadly the new government haven't done anything about this, and their fiddles with Employer NI thresholds suggest that they will make it worse if they think it will raise a bit of extra tax income, just like the previous Tory governments, or the Labour government before that.

It's so incredibly depressing that people have been complaining about this issue for years and years and it only gets worse.

This graph shows the marginal tax rate, including income tax, national insurance, student loan repayments and child benefit withdrawal. It doesn't include universal credit withdrawal, so the marginal tax rates are a lot higher at the lower income range than shown (I think they get to over 80%).

It's a diabolical mess.

I agree lone parents are treated unfairly by the tax system. I understand that in some countries there is a tax code for this whereas in this country you get a tax break for being married, which makes your life easier anyway. What a joke!

I’m in a similar situation (UPS3) but work 0.8.

Gives me tiny bit of breathing room and means I can mark summer and November without hitting any thresholds.

Got it.

Well you’ll be pleased to know it’s not quite as kind as that.

Between £100k - £125k they lose their personal allowance, which gives an effective tax rate of 60%.

In addition, all tax free savings allowances (outside of ISA) are lost, all childcare support & tax breaks are removed. It’s hard to really articulate those pieces as a %, but just to add that whilst it goes to 45% at £125k, it’s not really just +5%.

As a guide, the highest earners drop half their salary in tax.

I’m not asking you to show sympathy to that group, don’t get me wrong, but just to say they do pay a heck of a lot of tax and it’s not as simple as +5% (hence many have to also outlay for tax advisors).

I do think the current tax system is broken, outdated and needlessly complex.

I kind of agree. Had a payrise this year and also working really hard to start a business. Got excited that I might get a big order (all to be finalised in the new year) until I realised that if I take any of it out I will go over £100k and barely see any of it. Is a bit depressing

It’s super tough for single parents. The CB allowance has risen a bit though, it’s start to pay back at £60k rather than £50, there should be an exception for single parents though, it’s massively unfair that a couple can earn £120k in theory and keep it.

Hope you don’t teach maths

You’re forgetting that anyone earning enough to be paying 45% (more including the NIC) gets zero personal allowance. Every single penny of their income is subject to tax, unlike anyone paying lower rates of tax.

Exactly this. Higher earners are not receiving anywhere near the income that many people think, when you take account of the fact that they get no personal allowance, no child benefit etc.

You have my sympathies, I found out same time last year that my employers had been underpaying at previous job I left mid 2023. HMRC said they would collect it over 15 months starting Jan 2024. £200 a month. Still paying it. Money is tight at the moment and it means there’s little left each month so essentials like dental costs and optician have been put off which means next year I’ll prob have to pay hundreds at the dentist as filling I needed earlier this year is in a dire state.

It’s depressing - I hope it’s easier next year for you. Just a few months to get through. I know it’s difficult.

Nothing to do with "the squeezed middle". Being on tax code and not paying enough taxes can happen to anyone,no matter what job you do.

Yes I know exactly how you feel and I have no answer. I have more money than I ever thought imaginable as a child in a council house on paper, but financially I have less disposable income than ever. I was going to start doing evening clinics once a week (4-5 hours after working 8-6 in the hospital) but I realized the money earnt will go in tax and child benefit losses and childcare. Can't win. I got £200 back pay in October and my pension increased so I lost £170 to that and am still paying pension arrears from my unpaid mat leave. So fed up.

Just posting to remind anyone that is a higher earner to put side-hustle earnings into a personal pension instead of giving it up.

If your tax rate is 40% or more then every £1 you put into a pension only costs you 60p and your earnings for purposes of HMRC calculating the high income child benefit clawback will be reduced.

I work for our local council, I also get carers allowance. Every November we get a backdated pay rise from April, I earn more than I'm allowed to for claiming carers. I lose a months carers as a result and end up £50-100 worse off than if they hadn't bothered to back date my pay

Have you thought about paying into a SIPP OP?

Once I hit the 40% bracket I found it difficult to stomach the amount of tax I was paying. I now aim to pay as much as I can into a SIPP to keep my tax within the 20% tax bracket.

It means that my monthly available spend is less and things are tighter but eases the amount I pay in tax.

As for CHB for single parents v a couple...its infuriating and makes no sense.

Honestly HMRC are just awful. They've miscalculated my tax for 3 years running. Told me I owed £2500 then said they owed me £3000 which I received then said I owe them £5000. There is no recourse, the people you speak to at HNrC they just don't give a hoot. I'm now paying back the amount at £250 PM. And all I get told it's my responsibility to check my tax every month.

I'm employed btw so my tax is taken at source

That is how PAYE works! Over the year to April 5th the system calculates what will be due and takes more or less in the month so that at year end you should have your personal allowance tax free and unless you are highly paid you will pay 20% on the rest. HMRC sends a calculation to explain this at year end

I am normally the last person to encourage tax avoidance of any kind but in your specific circumstances you could earn much more by tutoring a few hours a week for cash in hand.

My post deduction salary as a teacher is little more than a minimum wage salary.

@Perfect28 for full time? That’s list not true