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.

@Hiddenmnetter thank you

Sounds ideal to me. If you're earning that sort of money what does it matter if your ambition is stifled and you ease back a little and enjoy life? You've achieved enough already. Meanwhile opportunities are freed up for other people.

Exactly this.

They're a fucking stupid idea wherever they are in the income spectrum, and if you don't care about this particular one because you happen not to personally sympathise with the people affected, luckily the UK has plenty of others sprinkled about the place. We can't afford any of them.

Thanks - what we would really like to do with any extra income is spend it on lifestyle though!

that’s the but I can’t understand - she could be taking in VAT on all this income high earners pile into pensions!

we spend / go out less than you’d think on current salary’s, agree with OP 100k isn’t worth what it was in 2010!

Currently only around 4% of earners earn over £100,000, the average UK wage is about £37,500 and minimum wage only around £25,000.

One day maybe £100,000 won’t be a good wage any more but right now that’s not the case, it may be worth less than it was with inflation but it’s still more than the majority of the population could ever hope to earn right now.

@Destiny123 you don’t need to have salary sacrifice, you just need to make a payment into a pension then claim the additional tax back from HMRC.

I’m making a significant contribution into my pension this year (everything over £100k, probably around 60k) as it will cost me less than 50% of the gross sum once I’ve got full tax relief. Yes, if I didn’t do that I’d have around £29k of extra income but I’m only 9 years from being able to access my pension, so it makes more sense to pay it into pension.

I think the £100k cliff edge should be removed, because it drives behaviour that likely leads to less tax being collected. Every year I have earned over 100k (except one, where we had a planned expense) I have paid the excess into my pension. Even at £160k earnings it makes more sense to pension it if you don’t need it for spending. If the 45% rate started at 100k I would think that’s fairer.

I also think all thresholds/allowances should be index linked (rather than the stealth tax system that successive chancellors have adopted) and we should have an honest debate about how much income tax needs to be raised, and who needs to pay it. Unfortunately our press won’t allow such discussions and our politicians are too frit!

My husband earns over £100k and I am an NHS nurse. He is very happy to pay high tax- if the services you get are good quality and the tax is well used. At the moment he is paying high tax to get no help with (super expensive) childcare, run down NHS, high crime in nearby areas and poor schools. We are both disillusioned and if I also could work in another country (I only speak English) we would have already moved abroad.

I never earned anything like £100k but I think everyone should get the same tax free allowance. If you want to tax people more at the top end then ok but just be open about that in the tax system rather than create this extra layer of complexity and subterfuge about how much higher earners are actually paying in tax.

Reeves is looking at salary sacrifice…. You may find soon you have no choice but to go part time if you want to avoid earning over 100k. However if you can do your job part time, why is your employer paying you a full time wage?

I've cut my hours to two days from next month so effectively semi retired.
I've not had a pay rise in 25 years as I reached CEO/MD early. I work for SME not the big global brands.

I have no issue paying tax and will be paying a huge amount shortly due to a company sale but I've spent the last two years unwell and unwaged. My long standing husband can't have more than 10% of my unused tax allowance but I wasn't allowed UC as I was married? I've lost my big income but I'm suddenly expected to be a kept women. It's a daft system. Ive paid a lot of tax in my time.
I think everyone should have a tax free element or you will find resentment.

They should be, top 10% pay over 60% of all taxes, and no incentive to earn. My husband is in this bracket, every bonus he gets he loses half, he's now in his early fifties and now looking to reduce hours as not worth the amount of hours and travel required for his role.

Yes this was a Tory policy, and because we don't have much cash as a country, it has been continued under Labour.
Agree with sorting out taping/cliff edge etc....

There's a significant shortage of consultant doctors in the NHS. We need to maximise the willing expertise we already have, not pretend there'll always be someone else suitable and available.

How does the pension element work? So when your salary goes above 100K, do you tell your employer to take out more contribution for your pension? Sorry for dumb questions here.

I didn’t realise the 100k cutoff had been set in 2010 and not revisited. I earned 40k in 2010 and I felt really well off, not so much now even though I earn lot more.

@jbm16 you put it so perfectly. Instead of this knee jerk reaction of ‘I’d love to earn that, it’s so much money’ people need to realise how much is supported by high earners and that there needs to be some incentive to keep earning more.

I think you overestimate the lifestyle that is achievable on a £100,000 salary - and the wealth of someone at that level.

It’s £5,700 after tax. £5,000 if you’re a doctor with an NHS pension.

A nursery place can cost £2-2.5k in parts of the country. A £500k mortgage will be another £3k a month.

These aren’t people at the ‘able to take their foot off the gas’ stage of life.

Yes. Tax is calculated once pension contributions are already removed (because the gov wants to incentivise paying into a pension). That post-pension payments taxable income is also what the free childcare and tax free childcare is based on.

So, simplistic example (assuming no other taxable benefits)
You earn £90k and pay 10% into a pension - taxable income £81k
You get a pay rise to £115k, you can up your pension contributions to more than 10%, to bring your taxable income down to £99,999.

I was commenting in reference to the people PP described who obviously can afford to do it.

It matters because we need smart, talented, well-trained, experienced people to work full time - they are not interchangeable with a 25 year old on min wage. We don't have enough of them to be stupid enough to encourage them to retire.

I think you've misunderstood the intention of this entire policy. Before long basically everyone will be caught by this. And that's a feature, not a bug. Boil the frog - at the start people were keen for it "rah rah smash the rich" etc. but then inflation means they're caught too.....

It’s a long term benefit to put extra income into your pension as a tax reduction, to a government in 20/30 years time

So those earning £100k+ lose the 'universal' £12.5k personal allowance? Didn't know that and it does seem unfair. But then I see that 'higher earners' only pay 2% NI to 'middle earners' who pay 8% which also seems unfair.

So I propose the personal allowance be applied to all earners and the NI rate increased to 8% for all workers earning over the NI threshold.

And end that crazy child benefit/childcare system where higher earning single parents are penalized when two-parent households earning much more are not penalized in the same way. The cut-off threshold should be based on household income, not solely on the highest earner's income.

It's unfortunate how often discussions about fiscal drag, tax bottlenecks and cliff edges and the intersection of tax and benefits end up with people talking about their subjective opinions on whether X amount is a lot. Because that actually isn't important at all, not least because nobody really cares what the person over the road thinks about it.

What actually matters is people having an understanding of just how much the UK system does things like this, how it's bad for all of us and why we need to fix it.

@TheHateIsNotGood they do pay 8%, in England the income tax rate is 20% and NI 8% until £50,570, then 40% and 2%. If you increased NI to 8%, you’d have an effective tax rate of 48% at the higher rate and 53% at the additional rate.