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!

I hear you OP. I don't earn anything like 100k but DH does. We are and always have been self-employed which means no employee pension, no sick/maternity pay worth a damn, no rights. The fool just announced he'll breach that threshold because he hasn't planned so we won't get. 30 hours, which I've been planning my whole financial year around. We have a massive mortgage, childcare fees and this fucking cliff edge has done for my financial planning.

I agree OP. It’s a shocking system which needs fixing.

to everyone saying you should be grateful, they clearly don’t actually understand the problem.

For the people who don’t understand - you take home £2,000 but then get a promotion, great you think. But actually you realise you now only take home £1,500 for extra work as the extra goes on tax, you would rightly be pissed off.

OP - while you have kids in childcare, put the excess over £100k in your pension. Once they are out of childcare, hopefully you will earn over £125k where the tax rate goes back down.

The post is about there being a disincentive to working.

i voted YANBU. I don't earn as much as you (approx 60k across two part time jobs) but I work in healthcare in the NHS and do a very small amount of private (self-employed) work on the side. The private income will almost certainly be taxed at 42% and then NI on top (Scotland). It's making me think there's no point in doing it tbh! We aren't rolling in it either yet I see so many people round me with new cars, multiple holidays etc. Who knows but I'm fed up with it too.

I think it's awful that so many people reduce their hours or plough money into their pension due to a situation which if removed would most likely increase tax revenues. Surely increased tax receipts is better for all?

But you’re extending the project to keep your billable hours under the threshold. Presuming you’re extending those hours over tax years you’ll still pay tax on them in the next tax year?

I also don’t think it’s a bad thing for people to be paying more into their pensions. It’ll either reduce pressure on state costs and/or be taxable at the point it’s paid out.

I can see short term how it feels shit but longer term both scenarios pay off.

Not if the max pension contributions still leaves you over the 100k threshold. Working more for less pay isn’t a bit shit it is a ridiculous scenario that nobody would willingly engage with. There is no future pay off.

Not according to all the economic studies on it. The policy reduces tax take and productivity.

No I am not, the whole post questions the incentive issue. As stated in the title. I genuinely fail to see how this scenario is beneficial to anyone. Surely the government should encourage individuals to earn more as it increases tax revenue.

I didn't say I was struggling, I questioned the thinking behind what seems to be a ridiculous policy that encourages people to work less.

I personally think everyone should have a personal allowance and certain benefits should be universal (to ensure you don't have a situation described and there is always an incentive to work). I woukd also be happy for income tax to be increased to enable this. I think someone earlier suggested 45% on anything over £100k - this seems sensible, wouldn't disincentivise people to work and would probably increase revenue.

@Bumpitybumper name those other ways. I dare you.

Currently 53% have voted that IABU, I wonder how that percentage would differ if the cliff edge were average wage rather than £100k.

This is what happened/is happening with hospitals consultants. There is a long waiting list of work that consultants can do and would be willing to for for extra pay but the tax and pension system is set up in such a way that they will be taxed more than they take home on a proportion of income. The excess tax they have to pay is on money that is locked in a pension that they cannot access until retirement, should they live long enough to.

Instead, what could happen is that pension contributions automatically stop once the annual allowance is reached and they are then taxed on all earnings for the remainder of the year. That way, they can still access their net income and, perhaps even spend it and put it back into the economy.

Probably the same people who are telling people on another thread - who have a higher income than you from benefits - they deserve it. Earn it, you’re rich and deserve to lose it, to fund people to have the equivalent of 6 figure salaries on benefits. Absolutely crazy.

YANBU OP, and you are not wrong. This country is fast becoming effectively communist and Marxist. At what tax rate do you effectively become a serf, 40%? Probably not, if you could still afford cost of living. 65%? Feels very high, especially with VAT on top of income tax and all other taxes. 70%, 80% (when considering 9% for student loan) etc..

Do you follow financial news? The budget was in the Autumn. The rumoured "pension raid" turned out to be the extension of inheritance tax to pension pots.

Just do what everybody else does and max out your pension!

I wrote that to fund public services there are other, better ways than taxing everyone to oblivion. I mentioned in my post that economic growth was undoubtedly one. 'Growing the pie'. If we can increase productivity and therefore achieve economic growth this benefits everyone. In OP's example this would look like her working the maximum number of hours and being taxed fairly on these so that she isn't disincentivised to work these extra hours. She gets more money, the economy benefits and the state benefits from the tax she pays on the additional hours worked.

All that does is shift the problem to a different income band and impacts a different group of people.

Yep, people like my DH, but he knows he's privileged and manages to get a warm glow from knowing his annual tax bill will fund the salary of a senior nurse and more. He certainly doesn't sit around feeling sorry for himself.

@LookingforMaryPoppins , by reducing your hours you get to spend more time with your kids. Win win.

Do you have nursery age children? If so are you seriously suggesting your husband intentionally works more to earn less?

Eugh why is it always ‘my husband earns’ with the self righteous posts. I value the opinion of women who do well for themselves, not those whose husbands earn well.

I don't understand your comment. My children are both over 18. DH is not self employed - he works 9-5 - so no, he doesn't intentionally work more to get less. He puts the max into his pension, but his bonus sometimes still pushes him into the higher bracket.

You need to read the thread as you don’t appear to understand what is being discussed.

Yes, I do understand. I'm just answering your questions.

Well you don’t.