To think the UK unfairly taxes families?

[OwnGravityField]

I have just found out that the UK is an outlier, in that it completely stops collecting a form of social tax (NI in the UK) once someone gets to pension age.

In every other country, pensioners’ contributtion as a proportion of income is much more similar to working households.

Example of disparity in the UK:

A working person earning 25k pays:

• Income tax: £2,486
• NI: £1,002
• total = £3488

A pensioner with an income of 25k pays only:

• Income tax: £2,486
• no NI
• total = £2486

So, a UK worker on 25k pays 40% MORE total tax than the pensioner (the difference between 2486 and 3488).

Let’s compare with a beloved utopia of fairness, such as Sweden: worker on similar salary pays 9% more tax than a pensioner.

Yes, other countries have slightly larger differences, but none except France come anywhere close to the UK difference in tax treatment between workers and pensioners.

In the interests of balanced sharing of info: France is tax and spend basket case. France taxes workers roughly twice as hard as pensioners. It’s obscene and the country is practically bankrupt.

Most other European countries narrow the gap by keeping small health or social contributions on pension income.

You might be thinking most UK pensioners don’t have 25k coming in? Nope. 3 million have individual incomes of 25k or more.

Anyway, I think it’s shocking that people at the most expensive time of their lives (kids, mortgage, food) are taxed so much more heavily. AIBU?

Oh maybe. I was just trying to “translate” what I thought the other poster was saying but might be as well to have kept out of that!

Who has said that the past was some kind of economic idyll? You have just made that up. It's a figment of your own imagination.

I understand something of the problems in the 70s but the fact is that housing was FAR cheaper relative to wages and wages rose hugely during that period. Neither apply now. Income tax may be lower for the majority but their essential outgoings are far higher. The boomer generation is the wealthiest that have ever lived or will live in the future. There is no reason why they should pay less tax than younger people. It's an ageist policy.

How about me then? Can i complain? Have never received free childcare, also don't receive child benefit because DH earns above the threshold (even though our combined income is less than some others who do receive it but whatever) been working 31 years so far with another 20 to go till I can retire. Paying back a student loan (for studying that I couldn't afford to do full time as a teen so had to do in evenings wholst working) and still paying a higher rate of tax for a smaller income and with higher costs than a lot of the pensioners my taxes are paying for.
To be fair I don't resent paying for others pensions. I do resent them paying a lower rate of tax on their income than I do though.

But you quickly by passed the addition of 20% VAT. Everyone should face the same income tax. If you are on a low income or lack physical or mental capacity there should be mechanisms to support you - there is no good reason why wealthy healthy pensioners should have preferential tax treatment and I say that as someone who will be a wealthy pensioner!

In addition, with the sharp change in demographics since the 50,s the current pension structure is not fiscally sustainable. Factually, we will run out of money to fund it. Something needs to change, surely the majority of broad minded folks believe that. You can’t have a working population funding pensions/social care/NHS to the exclusion of everything else.

Nail on the head. Those of identical incomes (from whatever source) should pay the same amount of tax, regardless of age, working status etc. Scrap NIC and raise income tax accordingly. NIC is a relic of a bygone time that has morphed into just another tax and is completely unnecessary. Especially seeing as so many get "NIC credits" towards state pensions without actually paying NIC, such as low income part time workers, child responsibility, carers, unemployed, disabled etc. There is no link between the NIC you pay and the benefits you receive - it's all about "credits" which for some people are "earned" without paying NIC!

Average pay rises were very high in the 1970s too! You seem to forget to mention that!!

Pension differences, I do see the point that OP is making. However I think we need to remember that back in the 1980s or so it we all realised that pensioners in other countries were paid much more than ours. There was a conscious decision to improve our pensions.
The Triple Lock is one of them as is Winter Fuel Allowance especially because many old people were living in lower standard housed. This kind of differential in tax is another. We are catching up with how Europe on how we reward pensioners and differences are tailing off.

Of course I don’t forget it. They didn’t keep with runaway inflation.

Please cite statistics and sources for this.

I came on to say exactly that.

In one year in the 1970s there seems to have been annual growth in wages and salaries of 30%, and as you can see from the linked chart wage growth in the 70s does appear to be generally higher than in some other decades

https://www.ons.gov.uk/economy/grossdomesticproductgdp/timeseries/kgq2/qna

dividends should also be taxed at the same rate as income

They are, more or less, but most people don't realise.

First CT is paid at 19/20%, then dividend tax at 8.75%.

£100 less 20% less 8.75% = £73 (27% tax)
£100 less 20% less 33.75% = £53 (47% tax)

Basic rate
8.75%
Higher rate
33.75%
Additional rate
39.35

If you compare salaries these are 20/40% plus 8% NI across a limited portion of your income. So effectively 20% plus 6%.

Thr only significant difference is that there are no employER NI's on dividends. And by significant I'm talking about roughly 14% - such is the government's tax on jobs. This is a tax i think should be abolished as it depresses wages and growth.

It isn't ageist to point out the system is CURRENTLY ageist - rigged against the young in favour of pensioners!

Relative to inflation, though?

No one has the right to say they’re finished paying tax, most of us don’t pay anywhere near as much in tax as we take out.

UC will be increased by 6.2% next year
More than pensions

The system therefore isn’t ageist

I think without a doubt the pensioners are going to lose their NI Exemption - it's just not sustainable given the projections on the increase of the proportion of the population who will not be working due to ill health and retirement. It's an obvious target.
The last battle will be the means testing of the state pension in maybe about 10 - 20 years, we can't keep increasing the pension age to fix this problem - or maybe we can by insisting you'll be 80 before you can claim it, otherwise if you don't have a private pension you'll live off pension credit. Fun times ahead!
Edited not pension credit - it would have to be renamed maybe it would be called age-related support. Only available to the over 67s.

Of course ut is. Pensions have the triple.lock which compares (way more favourably!) to annual UC credit increases but this thread is about tax not triple lock. Pensioners are currently taxed at a lower rate to workers on the same income. That is an absolutely ageist system. Rigged in favour of pensioners.

Exactly. I've made the point on this thread and another running one.
Surely this obvious to anyone with any sense.

In what way is it ageist? You mean ageist towards the current young? In that case, I agree.

In 20years ie 2045
New pensioners would have had the benefit of employer contributions to pensions for 27 years ( since 2018)
I think the change might come a little later based on that
ie 30 years so pension pots can build for 37years with those added contributions

I agree that it will be the first thing to go amidst much screaming. I expect they will do it gradually because of this.
Getting rid of the triple lock would be much harder and I suspect will only happen in a financial crisis, which will certainly come. The rise in pension age and means testing will also both happen. Then we really will see extremely poor elderly folk in the country. The current generation of pensioners should be thanking their lucky stars compared to what their grandchildren and great grandchildren will have to live with.

Yup, fantasy tokenomics - underpins the entire system...

Yes. It's ridiculous nowadays for all those reasons.

Cynically, I think governments want to get rid of NI, not for those reasons but because they can then turn around to the electorate and say that they didn't pay NI so are therefore not entitled to a pension. I think this will be their BS logic.