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’ll be a disaster if she limits pension tax relief as it will leave many people with just the 2 options of either accepting huge marginal tax rates, sometimes over 100%, or working less. It doesn’t take a genius to work out which one they’ll choose.

The total tax take will fall.

Why is it unfair?

Everyone pays 8% NI up to a threshold, over which it
drops to 2%.

This makes the tax rates 28% (basic), 42% (higher) and 47% (additional).

Your suggestion would make the rates 28% (basic), 48% (higher) and 53% (additional).

Add a student loan and the rates over £50k will be 57-62%.

With the. Birth rate at. Around 1.7 and an average 3 year gap between babies, that makes for 6 years of nursery fees over a 40 year career. The fees are large but they are not throughout the entire working life

Every extra pound that goes towards tax is one less pound spent directly in the economy - think meals out, shopping trips, hobbies etc etc. each impacts small and medium sized businesses. So all well and good to be glib about not caring about the top 5%. But the reality is that we are all being actively impoverished by a mismanaged, inefficient state. The ones who really don't care are the top 1%.

My point isn't to claim woe is me (I'm doing fantastic, yes). My concern is for my kids who will probably need to have more than £1million in their pension funds to have a comfortable retirement. What message are we sending to the next generations, be rich or just struggle til death? Taxed to the hilt to have the basics?

This is why I work part time. With a nursery aged child it's lunacy to earn more than £100k.

I think the radical thing would be to get rid of national insurance completely, both employee and employer. This would allow minimum wage to increase around 12%-15% because employers would be saving NI. This would make working pay, reduce the need for universal credit and encourage people to work. It would also massively simplify a complicated tax system (a whole department at HMRC wouldn’t be needed).
Income tax could then be changed to have more rates, eg up to £15k 10%, £15-40k - 25%, £40k-80k 40% and so on up to a maximum of 50%. This would reduce all the cliff edges, and everyone would pay some tax so there would be less finger pointing at who should pay more. The rates should increase with inflation rounded to the nearest £500.

If I plug in 100k to an income tax calculator- I’m not getting total deductions at 47% even if I put in £150k I’m still not getting 47% it comes out at 39% https://listentotaxman.com/

where are you getting 47% from?

The birth rate in the UK is currently 1.4 actually.

But, regardless ‘only six years’ of paying 100% tax on up to a third of your income… spoken like someone not doing it…!

With 30 free hours plus tax free childcare, then the loss of 15 hours plus tax free childcare (let’s say for 2x years each), that looks like ~£45,000 in loss of benefits over the period one child is in nursery. So £90,000 net or £180-200k gross in earnings (noting 60% rate will hit it).

So over 6 years you effectively lose £200,000 of gross earnings because of this policy.

Thats not a sum of money you can brush off as ‘oh it’s not forever’. That’s why most people are opting to put that £200k in their pension, claim the hours, and probably retire at 55 instead.

I had to pay total nursery fees, no deduction or free hours

FTE work allocation - amount of work should reduce by the percentage reduction in time. So if she goes part time let's say 0.6, then the remaining 0.4 is covered by another (extra) individual. That's fairly standard.

You should care. These are the net contributors. They are the ones that put more in than they take out.

39% of tax revenue comes from those people who pay income tax at the 45% rate. Those 862,000 people pay more tax than the average basic rate taxpayers as a whole, some 28,800,000 people. So 2% (the highest earners) pay more than 52% (average earners). The group in between (the high earners) contribute 32% of revenue despite only being 10% of the population (5,590,000 people).

The higher earners are also the ones that have professional qualifications and good skills. Their opportunities for working elsewhere are far better than the average. If the tax regime is too punitive, there's nothing to stop them leaving. It has happened before. Post Brexit, the UK is no longer the powerhouse it was.

People have been forced into it. We treat high earners terribly. We need to incentivise everyone to earn the most they are capable of, but instead we incentivise UC and many choose to work 16 hours to be eligible. It’s a fucking nonsense.

Highest earning 10% pay 60% of all tax take so they well should be everyone's priority

This is the problem with popular thinking. We should all care about how changes in the economy affect others, as indirectly they will impact them too. It's not because we all need to be crying over the financial woes of earners over 100k, but on a population level the economic policies cause changes in behaviour and attitudes that affect the economy for us all. Also, because of inflation 100k isn't what it was and also marks a threshold for loss of tax free child care. This causes families to become significantly worse off which inevitably affects women disproportionately. As others have mentioned upthread, it can also affect people choosing to work less which then reduces income to the treasury. Taken to its full conclusion, as the op has mentioned, at some point with wage inflation 100k really won't represent a high salary. The threshold should gradually increase to keep things gently balanced and avoid a preposterous situation like that arising. It's also softer on the economy which is good. Big, abrupt changes are rarely a good thing (see Truss).
Until we are prepared to have reasoned and nuanced conversations about this our country will.continue to be buffeted by populist and poorly thought through policies that benefit no-one. The current public debate isnt helping our economy.
Sadly, it simply isn't as black and white as low income good/high income bad. We all depend on each other.
For what it's worth, my household does not qualify for child benefit and I also feel frustration at people with precarious financial positions choosing to have larger families. However, I agree that the 2 child cap should be removed. Firstly for the sake of the children who never chose to be born into lower income families. Secondly, because the evidence all demonstrates that the 2 child cap contributes to increasing child poverty. This is bad on an individual and collective scale. It isn't good for children to grow up in poverty and the negative impacts end up costing the country money due to adverse outcomes.

Agree. But she isn’t bothered. She is going after anyone who dares to work hard, no matter what their salary. I don’t earn anywhere near 100k, but my daughters do. She will no doubt bump up my council tax we are in band G and already pay 4000. I work hard and genuinely don’t need to pay out anymore.

Irrelevant to the incentives of parents facing this issue today, people aren’t making decisions about their financial planning based on the tax and benefits system of 20 years ago.

I am far more incentivised today to take action to claim childcare than I was 3 years ago because the value of the new policies is so high. I’m going to react to that, not to the fact some people didn’t get any childcare help a couple of decades ago.

People won’t work for free - it’s common sense to try an maximise your income and take action in this circumstance.

The £100k, which I’m nowhere near should be changed, maybe add 1p on tax to everything over it instead. The cliff edge is awful tax policy. It would be good if they did something about the childcare limit too. Nobody should end up better off not taking a pay rise.

Your maths is not working, your percentages don’t work out

Elaborate.

Agree with the recent comments. The existing system seems to incentivised benefit claimants and disincentivise the top earners who are effectively paying for everyone else. It’s absolutely insane.

I did
read the post and use the calculator

You are referring to this?

You are confusing total and marginal rates.

Over £125k you pay 45% tax and 2% national insurance = a 47% marginal rate.

I think it’s fantastic to do confidently state these rates are all fine, while not actually understanding how they are applied…!

This ^…..when will people grasp this??!!

We should have a level playing field
Freepay of £17500 and then 30% tax on everything above that for everyone on all forms of income. Wages, pensions, rents, dividend, interest on bank accounts and all benefits including child related ones.
No one can say it's not fair if we all pay the same.

Yes they need to reassess especially with regards to the childcare cliff edge - it's essentially being charged more than 100% tax on anything over £100k. I'm a single parent and earn £105k and have a side hustle that brings in £10k. I get private healthcare which also counts towards net income but essentially I have to put everything over 100k + equivalent to private healthcare into my pension otherwise I'm shooting myself in the foot. It's annoying as I could really do with this money. I'm trying to remortgage and obviously doing it on my own in the South East I need the multiples.

They need to reassess all of the bands but they won't - they're always looking for ways to make us worse off (well that's what it feels like). I would expand my side hustle if I didn't feel penalised.