Where is the incentive.....

[LookingforMaryPoppins]

Fairly certain I am going to be shot down and 100% appreciate I am in an incredibly fortunate position however.......

My parents are working class, money was short but I never went hungry. I was taught that education was everything and the value of the opportunities it offered. I passed the 11 plus, went to grammar and was the first in my family to go to university.

Fast forward to now and I have a well paid professional job which I (mostly) enjoy. I am now self employed (to give me the flexibility to be there for my youngish children) and have ended up in a situation where I worked far more hours than I would choose due to not wanting to let clients down. This has resulted in a huge tax bill - despite putting a good amount aside, when you hit 100k you start losing your tax free allowance which effectively puts you on the equivalent to higher than the highest bracket. I think it equates to over 60%.
Ive also had the increase in school fees this month - having started off in state school it was very clear there was a total failure to meet needs (youngest daughter is academically bright but dyslexic - this means she "meets expectation" in state provision so gets no help albeit fails to acheive her potential which apparantly is acceptable to the state education system).

Despite the increase in fees, which we will cover by not taking a family holiday, I have now chosen to reduce my hours to keep my income below £100k. This is at least a £20k loss in income tax to the country (less than 12k take home reduction to me), another £6k loss to the country in VAT plus the loss to the economy of the money I have forgone so am not spending.....

I know this country has the mentality of despising anyone doing better than average but surely anyone with any economic sense can see this is a lose lose scenario......

If I didn't have school age children whose education would be detrimentally disrupted I would move to different country!

You could put the 20k in your pension? The 100k cliff edge is a shitter though.

Sorry but I have zero sympathy for anyone who thinks they got "an unexpected tax bill". That's like saying you're surprised when Christmas comes round on 25th December.

when you hit 100k you start losing your tax free allowance

Are you hitting £100k on taxable income, after putting the maximum into your pension?

If not why not?

Do you drive on roads? Was your doctor/dentist educated in state schools? Are any of the parents of those teachers who teach your children,cared for by the public sector? Do you use librarys? Are your rubbish binns collected?
Do you get my meaning?

Paying an appropriate amount of tax is a privilege. It's the cost of living in a caring society.

If you'd sooner walk through streets filled with beggars many of them children, I could recommend some other countries for you to live in. But you'd probably have trouble getting such a well paid job, what with you being a woman.

I agree that the removal of childcare + personal allowance creates a huge disincentive and is very unfair.

With two in nursery I will earn £0 between £100-135k.

If I earn anything less than £135k… I will earn LESS overall than on £99k.

100% marginal tax rate applied to parents of young children in professional jobs - it’s totally absurd.

Happy to pay tax, happy to pay lots of tax - not happy to pay a 100% and be excluded from a benefit 95% of parents are given.

Over £4,000 a month for two in childcare here now, that might be 80% of your pay at £100k.

You're not wrong. But this is mumsnet, I'm sure you're about to be criticised for daring to be on more than minimum wage...

The 100k loophole is awful. I'd really looking at upping your pension to try and negate some of the damage.

Same situation for me too with the cliff edge. It doesn’t make sense for me to earn over £100k, so I will whack anything over that in to my pension rather than take the huge tax hit. It’s a short sighted policy with the cliff edge, penalises parents disproportionately.

Stick in the pension. The "cliff edge" thing only applies for a handful of years when you've got young children.

If you are self employed you should talk to an accountant - lots you can do to manage your tax liabilities.

Who said unexpected? Surprisingly large - as I said, I have put money aside (I always over estimate what's needed). You don't know the exact amount until you submit the figures.

The cliff edge is brutal, as others have mentioned would consider exploring putting some into a pension as then your earning trajectory isn't disadvantaged (once you hit a certain point post 100k you aren't affected by the unfair cliff as it were).

I agree with the tax system. I have no issue paying tax and the more you earn the more you pay.

My issue is the loss of personal allowance at £100k creating a fairly sizeable bracket where there is no incentive to work.

Surely a system whereby a person earning 100k takes home more than someone earning over 100k can't be right.

Doesn't effect the super high salaries to the same extent although haven't run the figures to work out at what point the tax starts reducing back to the top rate.

Thank you, very well said (far better than me).

Its entirely absurd! I don't have any issue with paying tax and I don't have any issue with it increasing the more you earn.

Its the removal of childcare and personal allowance that makes no sense and creates a ridiculous situation where people are better off not working.

YANBU at all, people have to weigh up their personal circumstances. It’s ridiculous to expect people to work and accrue minimal benefit to themselves. It’s not how people actually work. The cliff edges need to be fixed, I’d rather you were working longer hours and paying more tax too OP! Anything that disincentivises you from doing so should be sorted.

Alternatively, lucky you, earning enough to live a decent lifestyle while working flexible hours to be with your children. Glass half full or glass half empty?

If you are only incentivised by cold hard cash, then yes I can see the issue. However, you have said that you're incentivised by "not letting clients down" and have e alternative, presumably, of taking on fewer clients to reduce work and therefore income; or increasing it to get over the £135k hump (and giving up some flexibility).

(N I am in the same tax bracket, from a similar family background, if you were thinking that I despise you for doing (significantly) "better than average")

(youngest daughter is academically bright but dyslexic - this means she "meets expectation" in state provision so gets no help albeit fails to acheive her potential which apparantly is acceptable to the state education system).
"Apparently"?! That's common knowledge surely, and has always been the case! Again, surely a better situation than not having the option of private education - it depends on your point of view. It certainly doesn't sound like you appreciate your position; it could be a whole lot worse...

Having never played the tax system to my advantage, largely on the basis I think people should pay tax and it is fair to pay more the more you earn, I am now a convert! I will religiously keep below that 100k mark whether it's by working less or syphoning it into my pension!

Not sure how long that will be possible though, isn't there rumblings of a pension raid 🤦‍♀️

Even when the children are older so the childcare doesn't apply, there is a bracket over £100k where the total deduction for every £1 earned is effectively higher than the highest tax band.

What is the thinking behind that?

As I said in my original post, 100% appreciate I am in an incredibly fortunate position.

Op how dare you do well for yourself. If I were you, just run the fuck out of this country.

“I know this country has the mentality of despising anyone doing better than average“

I have never met anyone in my life who has this view or anything similar to it.

Which country would you move to? As you would either be paying less tax but a hell of a lot more for services, or more tax and paying a smaller amount for services.

I agree you’re better off taking to an accountant rather than mn where you’ll get some barb back

Or if paye do pension?

Now you're being ridiculous - you're not "syphoning" money into your pension or playing the system, this is tax avoidance according to the rules not tax evasion, playing the system, And you don't have to be "converted" - we're not telling you some dirty secret that you shouldn't be doing.

you need to read up how pensions work.

All UK tax payers get to put income into a pension scheme tax free to build up their pension pot during their working years and then when you retire, you draw out income from your pension at whatever rate of tax applies to you. So you're still contributing to the country, just at a different time.

just put the money in there, and worry about a Daily Fail style "pension raid " if it even becomes reality.

Out of interest, to those that think IABU, on what basis do you consider it fair that someone earning £110k pa takes home less than someone earning less than £100k?

Where is the economic benefit (to the country) to make it more worthwhile for an individual to earn less (and subsequently pay significantly less tax).

To me there should be incentive to work and therefore increase tax revenues on the basis this is beneficial to both the tax payer and the public purse!

And yet here you are, complaining and telling us off for "despising you for doing better than average." Bit of a contradiction there 🙄

I think OP would like to know where to collect their halo.