The loss of an individuals personal allowance (for earners over £100,000) should increase each year with inflation.

[Itsthedifference]

If the personal allowance is raised from £12,570 to £20,000 (Great):

Then, by the same justification, shouldn’t the £100,000 “cap” be raised?
(Where an individuals personal allowance is reduced by £1 for every £2 of income earned over £100,000)

Surely the loss of your personal allowance should be increasing each year with inflation. Yet it’s been the same since 2010.

It’s a very different case because at 100k you are impacting the more significant tax payers and pretty much forcing them to make a decision that will reduce the total tax paid by them.

Creating an effective marginal tax rate of 100%, in the case of higher earners with nursery age children, should not be happening in an effective tax system.

However, we need them to work for the extra money so taxes are collected, if we put them off working too much there will be less collected. We need to see ourselves as a team almost I think, rather than us and them, otherwise the system won't work.

I work in a gp surgery. Not a single gp works full time, not even the ones without children 🤷‍♀️

Nobody is "put off" working by taxes, they have other reasons. Perhaps they are lazy and feckless and shouldn't be asking for special benefits 😉

I put YABU but now I know this I rescind it.

It’s not the only downside, the other downside is that by dramatically cutting tax for everyone, benefits and services would also have to be slashed otherwise the country would be broke. That’s probably a downside too, no?

They absolutely should be as they pay the bulk of all income tax.

Someone earning 125k pays 17 times more income tax than someone on 25k. They also receive no child benefit, no tax free childcare and have no access to 30 funded hours.

Without them, everyone else is bankrupt.

Anyone proposing a 60% tax threshold on £64000 back in 2010 would have been laughed out of government. Yet that's what we have now.

We have this strange issue in society where people dont seem to be able to get their heads around the fact that 100k is just not the benchmark headline figure it used to be. This has allowed successive government's to keep the ludicrous tax and childcare cliff edge that hasn't been adjusted for inflation in 15 years.

@Emiliachonk I don't think anyone is going to answer your question of the source of this information

This isn’t likely to happen until 2028-29, quite a long way off. I think it needs to be done sooner. People spending power is decreasing already, pretty bad for the economy,

I agree with this, I also think it’s mad that household income isn’t looked at holistically.

when I went (just) over £100k, I had two children in nursery and a DH working as a TA for £15k. Nursery fees went from £2k to nearly £2.5k, our mortgage went from £1200 to £1800 (thanks Liz Truss) and all of a sudden we were really feeling the pinch. We had to delay DH studying for a degree for 3 years, which has also had a knock-on in terms of his earning potential.

I am really pro higher earners paying tax - I’m proud of the welfare system we have and it needs to come from somewhere. But I don’t agree with the sharp cut off at £100k; there are lots of people in a similar position to me and it is so demotivating. the problem is it’s such an emotive issue, you invariably get people saying ‘cry me a river’ and ignoring the issue. The answer here isn’t to fall into ‘sides’, it should be to come up with a system that tapers and is more proportionate.

To be frank only the top 20% of earners make a net positive contribution to the economy (pay more tax than services used). Fundamentally if you aren’t in that top 20% you are, gulp, a scrounger!

It always intrigues me when OPs start threads about things they have read but don’t actually quote what they read so we can read for ourselves!

I suggest you look up the “Laffer curve” to educate yourself.
https://en.m.wikipedia.org/wiki/Laffer_curve

I’m now in this bracket and my bonus will all go in my pension and I’m thinking about going part time. I’m by no means wealthy, but there’s now no incentive for me to work harder and earn more.

I dont know anyone prepared to do additional work for 60% tax (plus the loss of valuable childcare). Its simply too high.

I know plenty of NHS consultants who refuse to do any extra work within the NHS because they are paying 60% tax on this income. Because of the way their defined benefit pensions are calculated, they cannot up their pension contributions.

Instead, they do additional private work and use accountants to make this tax-efficient. This makes no sense for anyone. The NHS loses out, and society loses out on the 45% tax that would have been paid.

If this was happening at just over £60k in 2010 the reaction to this would be completely different to the "well if you are lucky enough to earn 100k......" attitude we have now.

Nobody earning £100k plus is either lazy or feckless. Especially not surgeons 🙄. As you get older you realise time is precious and if you are not remunerated for the skilled and stressful work you do why on earth would you do it? When you could be on a bike ride or spending time with your kids. Stupid shortsighted system.

Before you criticise you need to consider these taxes payers are carrying everyone else.

It’s worse if you’re in Scotland AND a high earner- the Scottish Government hates any sort of aspiration and the politics of envy is strong.
DH put more into his pension instead.

Or doing private work as a limited company to be tax efficient. Higher earners are getting fed up with it.

They can’t avoid the tax by doing private work. It is a myth that accountants can miraculously spirit away tax liability. What is more likely is that they are going private to punch through that dodgy 100-125k earning “pointless area” and get way above that where earnings start to make more sense.

Yes you still pay tax as a limited company but it’s not as punitive as the £100-£125k tax trap still setting it all up is a faff though.

its a terrible feature of the tax system and I say that without making a judgement about whether high earners should pay more or less tax. Whatever your view on how the tax burden is distributed, cliff edges like this drive people’s behaviour in an undesirable way.

There are articles about this in the papers practically every week: The curse of the £100k salary — readers’ stories

https://www.thetimes.com/article/71f10932-b212-4f12-8df0-bb14b2798bea?shareToken=3e30f4a5d258bcd2c21ffd30f5d3e8a3

Are lower income earners to go part time to spend time with their children also lazy and feckless?

Of course tax features when making decisions about working hours and conditions. I would earn over £100k if I worked full time but I chose to cut my o hours to 80% FTE and spend the time with my children. The take home pay for the extra day wasn’t worth it for me.

That’s a ridiculous statement.

If you earn £99,999 and then have a £1 pay rise you immediately lose 30 hours funded childcare and tax free childcare. That is worth between 7k and 10k per child for the funded hours and an additional 2k per child for tax free childcare.

Now look at your marginal tax rate. You lose your personal allowance between 100k and 125k creating a marginal rate of income tax of 60%. On top of this you need to add NI and also for many people student loan repayment. That creates a marginal tax rate of 71%.

So if you consider someone with young children earning £99,999 getting a £25k pay rise they would pay £17,750 of that increase in tax meaning they keep only £7,250. Out of that £7,250 they now have to pay all of their childcare costs as they no longer qualify for 30 funded hours or tax free childcare. For 1 child this amount will be in excess of the total amount they keep after tax meaning they are worse off than having not had the pay rise.

Would you work hard to earn an additional £25k and be happy to be worse off than not earning it at all? Would you consider them to be “lazy and feckless”?

If you have 2 nursery age children and earn £99,999 you need to earn over 40K extra before you are £1 better off. In those circumstances, earning any salary between £100k and £140k leaves you worse off than if you earn £99,999.

I’d love to know how many people on here who see no issue with the tax system at that level would be happy themselves to work more hours for no pay?