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.

Thank you for this post. I was desperately trying to figure out where this conversation had even come from!

But also, just a juicy reform carrot to entice people into something that isn't fiscally sound to win votes and also create more division.

People really don't have much empathy for the high earners and biggest tax payers in our society after all.

Nobody is saying that they shouldn't pay more. It is a question of how much more, for ever decreasing returns, is reasonable. And at what point upping tax and means testing becomes counterproductive.

It's part of the larger question of fiscal drag. The 40% tax band hasn't moved with inflation either. It's a huge drag on productivity and growth but to restore it in line with inflation would cost billions.

You're mis-reading.

Nerd alert ⚠😉

I wondered why there are always a high number of people on threads like this saying they are affected, when others say statistically it’s a small number. I thought it might just be confirmation bias, but then looked at the numbers.

It’s often touted as “only 4% of people are affected” but that’s misleading. In reality, that 4% is a snapshot in time.

If you shift that to a lifetime incidence (because pay generally rises with experience) then 10-12% will earn above £100k at some point in their career.

If you then extrapolate for households affected by the cliff, rather than just individuals, because most couples pool finances and what affects one affects the other, then roughly 20% of households would be affected by the cliff (19-23%)

Given the correlation that most high earners reach that point in their 40s, we start to see why there are so many Mumsnet users who are actively raising kids and are affected by this issue.

[Even if you allow for associative mating -the fact that people tend to pair up with others like them (2 high earners together because they met in the same uni course) - the percentage of households affected only drops to 16% at its lowest (16-25%)]

I agree and I’m in this category. I’ve thought for years that 1-3% extra on income tax would make a relatively small difference in pay packets but cumulatively would raise a lot. However, they should have done it decades ago - instead of austerity policies we should have been taking some of the hit in income taxes - and then we probably wouldn’t be in such a mess with schools/hospitals/infrastructure seeing so much waste through underinvestment (e.g. scrapping Sure Start saved little but has probably cost the school system and healthcare billions over the years as a result of children and parents not being supported early). Not to mention the money we’d save on interest on what we’ve had to borrow. I would love to see an in depth study into the cost of austerity in economic and societal terms (I know it would have to involve a fair bit of conjecture!) vs. a 5% rise in income taxes. If you look at many other European countries, they’ve been hit by the various cost of living challenges, but they don’t seem to have had the same level of impact because they pay more tax (though Brexit also didn’t help).

We have had five NHS consultant posts vacant at our local hospital for the last six months. Salary £140k.
These medics have huge student debt and have worked very long hours.

I did 6am -10pm throughout my career.
My DS recently got headhunted for a £120k job, he turned it down. Wasn't worth the ridiculous hours for not much more salary. I let him do the maths as he's an economist. He saw what I had to do and he doesn't want it. Lots of gen Z don't. That will effect our tax receipts.

The thing is,if you fall into the 60% tax bracket, but are a young high flyer, you probably don’t want to go part time as you hope you will soon earn more. But if you are pretty much stuck at that level I would try and drop a day. There again, future governments may make it more attractive and you may struggle to get promoted.
Me, I make more on the stock market, than my salary. But no doubt capital gains allowance will be cut.i I stay in my job for security and it keeps me young. I will also have a guaranteed pension.

Losing the fiscal lock and using that cash to address fiscal drag would be much fairer. And cutting national insurance but raising income tax by 2p. Working people with kids need to be less dragged down by excessive taxation.

While I understand why he turned it down, he should also look at where that role would have led? Would it have opened doors to much bigger salaries in the future?

My husband was earning £125-£140k for a good while before cracking into the £250-£300k plus bracket.

Earning a little over 100k is a big salary of course, but it bugs me that people don't realise that it doesn't go that far! Take home is about £5k a month after tax and pension. Childcare for us is £2.5k (paying in full with no discount or child benefit) and mortgage is £2.5k. So my whole salary is mortgage and childcare. Luckily my husband earns well too.

Obviously this is very privileged, we have a lovely house etc. Not a day goes by when I'm not grateful. But we're clearly not rich, no possibility of private school etc, and we work long, stressful hours. I think often of working for less money and stress, taking us below thresholds.

The UK raises less revenues than most western European economies which is largely due to the UK raising less from social security contributions (NICs in the UK). In 2023, social security contributions in each of France, Germany, Italy, Spain and the Netherlands exceeded 12% of GDP. In the UK, NICs was equivalent to less than 7% of GDP.

This right here is why we are struggling to afford our pension and benefit spending. Not enough going in.

It traps women who are low earners but have partners earning over £100k.

The cliff edge means that it's cheaper for women to stay at home than to return to work once they have children. It leaves them vulnerable for a variety of reasons, but because they have partners who are high earners they aren't deemed vulnerable by society.

This is the middle class paradox where emotional and financial abuse is somehow invisible and somehow doesn't exist - except of course it does. And you get people in other situations not taking the problem as seriously as they should because of this gap in understanding and thinking these women should be grateful or aren't legitimately being abused.

The reality for some is that should they wish to end a relationship they are screwed because of this. Whilst they live in an expensive house, that house might be mortgaged up to the hilt so there's minimal assets in the property to be split on divorce. It's worse still if their partner is self employed (this isn't unusual for contractors to be in this band)

It also means a woman may be out of work for several years and find it much harder to get a job and be able to support herself. And feel that she will be unable to leave with children as she can't provide for them.

Whilst she could go to a women's charity there is a issue with the perception about being well off which means women in this situation feel they don't think they will be taken seriously or be viewed as 'in need' - especially if the abuse isn't physical. It's a legitimacy issue and a sense that others are in greater need.

So yes we should consider the implications of this and arguably tax more but give free childcare for all so that you don't have anyone falling in between gaps of taxation and therefore left vulnerable.

But yeah... No one wants to acknowledge abuse in middle classes...

What do you mean? Someone on £200k pays more tax than someone on £125k.

I know a lot of his friends are not that interested in money. I was a council house kid, the DS will inherit. My career paid for his lifestyle although he worked from 14.

He makes good money at 26 but he'll find away of increasing his earnings I'm sure.

The withdrawal of the personal allowance should be scrapped entirely, along with the withdrawal of child benefit and childcare funding. These cliff edges in the tax system have all been shown to lower UK productivity, lower growth, reduce economic participation, lower overall tax revenues and also increase skills shortages and therefore increase the need for immigration.

It's a bit short sighted to say that as the top 10% of earners contribute 60% of all tax. Disincetivising high earning by punitive tax measures is a one way ticket to a situation where more people take out from the state than they put in. Which is where we are as a country. This thread is full of people saying they have cut hours, stopped climbing up because of it and that is a net loss to the treasury.

On the other end of the income scale - they should increase the cut off income level for free prescriptions and dental treatment etc. This has stayed the same despite the min wage increases meaning people who used to be able to get help with it are just above the theshold now but cost of living increases mean they aren’t better off than before.

All the thresholds are a nightmare to those just on the edge of them and often unfair.

The other problem is that by those NOT moving above £100k means that those in lower wages don’t get to move up either in salary.

It is the wage issue with min wage - raising it dramatically means that those on proportionately more rightly require additional. By people jumping ship at £99,999 we are escalating stagnation. And yes, when you are on min wage/low earners it’s a fortune and seem unfair - many of these roles are critical.

We need a solution, and there are more sensible taxation policies that would be fairer. The alternative is losing multiple higher earners and forced cuts and poverty becoming further widespread.

And I’m nowhere near a high earner - still in the 20% bracket.

This thread has made me look at my 2010 wage vs current wage. In numbers I’ve more than doubled it (£30k to £68k) but in real terms (using an inflation calculator) it’s only around £12-13k more. That’s less than £1k per year over a 15 year period in which I’ve had multiple promotions, I work much longer hours and have significantly more responsibilities, including legal liabilities. That’s a bit depressing!

My partner is facing the cliff edge, as he’s just inched over £100k and is putting more in his pension. He’s been approached about better paying jobs over the past 2 years but hasn’t put himself forward as it wouldn’t make financial sense due to childcare etc.

Then we need better succession planning, training and progression so we're not overly reliant on a pool of people who have the resources to (understandably) jump ship for more leisure. Not every aspect of a senior person's role is highly skilled. A less experienced person can take on some of it, upskilling in the process. We all retire at some point and less experienced people take over. This needs to be managed not avoided by offering financial incentives for people to keep working away when they could be enjoying life.

But everything else is the problem, tax is the problem as whilst people are blaming the tax they don't look at the low wages - which are a problem. People state if you put the wages up, then inflation will go up - yet wages have stayed low and inflation hasn't, so that doesn't work out.

on £200k total tax deductions are £82k / 41%
on £125k its £46k / 37%
a difference of 4%

on £100k its 31% £31,349
on £25k its 13% £3438
a difference of 17%

Yes literally no point going for level above at work!

it’s not that different to the opposite end of the financial spectrum problem - the post the other day about the family not wanting to earn more because they’d lose UC.

Why would you want to do more hours in your stressful job (cos that’s likely if you earn over 100K) when those extra hours effectively don’t make you much more money? In fact in some cases they cost you money with nursery fees etc! I’d definitely just drop a day and enjoy my life more, especially if you’ve got young kids.

If the system didn’t stifle this ambition then there would be a higher tax intake, more NHS consultants etc - so yes those of us who earn way below 100k (ie me and my DH) should care about this because it does ultimately affect us too!