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.

This is me. I purposefully work 0.8 AND have not taken a promotion to stay at £99k. The jump up won’t be to £130k so I will have years of earning less.

And I know I will be slated for this, but in the SE, 100k is a very normal salary for people with professional jobs. I am technically senior but have no money left each month after paying a mortgage, activities, bills etc. I am going on mat leave in November and will 100% have to use savings to cover my time off.

I’m in the current position where I earn £100k. I’d like to take the next step in my career where I’d earn £130k. It’s basically pointless until my daughter is out of nursery… why would I take on extra stress and responsibilities for barely anything extra (a couple of grand a year when you factor in loss of childcare, personal allowance etc.). It’s absolutely stagnating growth.

The whole tax system needs reforming - it has far too many of these cliff edges and disincentives.

Id argue they should just scrap the removal of the personal allowance altogether. Wherever it goes, it creates a ‘lump’ of 62% tax on additional income which is… too high and will cause people to take avoiding action (reducing tax revenue for the treasury anyway).

They also should make childcare access universal. Removing it at £100k excludes 2-3% of parents apparently - creating 100%+ tax rates over £100k. I know many families in this situation - and all are putting large amounts in their pensions or moving to part-time work to claim it - because the numbers are so large (even worse now with the loss of 30 hours from 9 months).

For me personally - with a baby and toddler in nursery I basically am no better off on £150k after tax and benefits than on £99k. That shouldn’t really be possible!

You can’t have a sensible discussion about it on here as many can’t see beyond ‘but that’s more than I have so what are you complaining about’.

How much extra would the promotion have brought in?

and doesn’t this impact future career development? Negatively

100%, we always say it's a nice problem to have but it's one of the reasons DH took a demotion recently. The bonus isn't worth the extra hours after tax and loss if childcare. It's counterproductive.

I know a lot of NHS consultants who have part time contracts.
The rest of their time is in the private sector with a business/private company set up.

There are resident/junior docs who work part time because of the work life balance (their working week is 48 hours unlike the 35 hours that most people do)

With the greatest respect, you dont appear to know what you are talking about. Tax liabilities for limited companies are different to those for individuals. Pay dividends to a lower earning spouse / tax written off for company cars, mileage & other expenses. Fundamentally different to paying 60% marginal rate of tax.

I also know plenty of NHS consultants who either go part time, or simply refuse to do any extra work (above the 40hrs per week) - at 40 years old. Just about the most econominally productive age any individual will be. It's mental.

Anyone in the private sector i know earning above 100k puts the entire additional salary into a pension.

So instead of 45% tax on that now, the government gets 20% in 30 years time. Also nuts.

The top 1% of earners pay 30% of all income tax, and the top 10% pay 60% - a tax policy that encourages them to lower their earnings and therefore pay less tax I think k should worry us

@Emiliachonk yes it does impact career progression - people in my position (and I imagine @Dueindecemberr’s are facing that choice. I didn’t go part time and instead had squeezed finances for the last 3 years because, sadly, I’m senior in a male environment - if I’d gone to p/t to manage the tax cliff, I absolutely wouldn’t be seen as being serious about my career and my progression would have stalled if not fallen away completely.

All the bands are frozen until 2028 at least anyway.

Is there any realistic prospect of the PA changing earlier? I was under the impression this budget was going to raise taxes, so reversing a previous freeze of the bands that was done 4 years ago seems a little unlikely.

Increasing the PA to £20k is a Reform policy. I’ve just looked and the IFS says this will cost between £50-80 billion, so Reeves is not going to do this.

I think it speaks to a wider philosophy in our country where there isn’t a great motivation to progress in your career though.

i was reading a thread yesterday where benefits (or the loss of) were actively encouraging a couple to work part time and not progress or get better paid jobs and they were really struggling.

Whilst on a much higher salary, this feels similar, the cliff edge is discouraging people from earning over £100k. AND this then impacts women and the gender pay gap because of the loss of free childcare hours and tax free childcare disproportionately affects women (particularly single parents).

I think we all need to care about a government that actively discourages hard work.

OP, I agree it’s annoying. However at that income you should be able to afford some financial advice.
while you’re in the “tax trap” band (I think it’s around 100-140) you can effectively reduce your salary by making high contributions to your pension. When you’re out the other end, you start hitting the pension tax limits on annual allowance (which reduces at 200k) so you will be grateful for those extra £ invested when you were earning £100k.

Once you earn over £50,270 your National insurance drops to 2%

so on £100k you’ll pay 2% ni on £49,730. Of your income, instead

The issue we have is that "it's a nice problem to have" or "if you are lucky enough to earn.." all stems from this mystical £100k figure.

If you were hitting a threshold at £64k in 2010 I seriously doubt anyone would be talking about this cliff edge in those sort of terms.

Similar situation in this household - DPs next promotion will take him over 100k - however we don’t want it! Planning another baby, would mean no entitlement to the free childcare vouchers, therefore I’d have to give my part time job up to do it.

Loads of the young consultants are dropping their hours to stop losing the childcare as with 2 toddlers it makes a huge difference just being slightly over

(Predominantly as we don't have the option to salary sacrifice into pensions like most high earners do to get round it

DH works for NHS 0.85 because although his FTE is £75k, his pension (12.5%) student loan, tax and NI basically total 63.5% and then we also lose child benefit. He can’t earn enough on the 5th day to cover nursery as we’ve used up all the tax free childcare.
Now earning £65k, he has a day off, we keep the child benefit, and the NHS pension is 10.7% so we are about £200 a month better off.
For NHS staff the more they earn the more the pension deduction is, if you add that into the calculation and you also have a student loan, over £100k and you are at over 80% of deductions.

It's also the 40% tax threshold, 3.5% of people were affected by that in 1991 and now it's 13% people in quite ordinary jobs are losing higher rate tax, all of the thresholds have stagnated for too long

As mentioned above, you can put the extra income into a SIPP (or additional pension contributions via the employer), which solves the tax and childcare issue.

The problem is, does your DP think the additional work and responsibility of a promotion is worth the extra time and effort (particularly when children are young) for some additional pension contributions....

In the long term, punching through to above £125k and school age children then puts you in a different position. But it's very challenging to think that 5-6 years ahead, and a lot of people answer "no" to my original question.

He can put more into his pension to offset it and keep taxable income under £100k, you won’t see the benefit of that for many years but it’s still a benefit to have a bigger pension.

Our household income is not near 100k. But i think removing the tax free allowance is wrong and I think the childcare should be universal.

I think it reduces tax intake rather than increases it as people do anything to avoid it as is so unfair.

This 👆. It’s not an accident. Economists call it “fiscal drag” and it’s why every government that says “we need to raise more tax” are basically lying through their teeth. Every year as inflation devalues currency, wages rise in proportion. This means the governments tax take increases in proportion.

Average uk salary in 2000 was around 19k. Today it’s 37. So nearly double. And the tax brackets have moved once in that time…feckless spendthrift governments are the problem.

But the curious thing about this threshold in particular, is that it means the tax rate goes from 40%, to 60%, then back down to 45%.

Which isn’t some intentional clever policy trick. It’s a hangover from the financial crisis when <1% of earners were at this level.

I wasn’t old enough to be interested in this debate in 2009 when it came in, but I’d be intrigued to know as it made little sense then either (and can’t have raised much tax revenue).

Absolutely not the point of this thread I know, but it seems that there may be people in here that will know the answer. The childcare that is impacted at £100k - am I right in thinking that the funded childcare at 3 is universal regardless of income? I’m just asking personally, haven’t got round to looking yet

16 hours is universal. The 30 hours is lost over 100k