To think that frozen tax brackets are counterproductive in growing the economy?

[Somedreamer]

I earn just enough to fall within 40% tax bracket. I have enough to live on and I know I am lucky. I wouldn’t however say that I am by any means ‘wealthy’.

I live alone, and maintaining the house has been very expensive this year. I really want to go on a long haul holiday and have been saving up for this, but needed to spend this money on house repairs.

I looked into getting a second job (minimum wage, just a few hours at weekends) to earn a bit extra that I can put this aside to keep my holiday plans on track. After higher rate tax, and after travel costs, I would only be taking home about £5 an hour, and I realised I can actually save up for my holiday quicker and easier by cutting my outgoings.

Obviously that’s all fine and I’m fortunate to be able to do that, but thinking about the economy, isn’t it better to have people working more and spending more so that they can have the things that they want? Whereas I have just decided to work less and spend less.

This has been in the news for ages sorry OP.

I do agree, if you paid less tax, then you would have more money to spend, but that’s obviously not what the government wants.

Put like that it does seem rather obvious!

But you are still spending the same just not on your long haul holiday.

Errr... what?! There is not a government in the world that wants people to spend less!

OP @Somedreamer , it is abundantly clear that we are already struggling to fund basic services currently. So, if we people like you paid less income tax, what would you tax to replace that money or what services would you cut?

Literally everything Rachel has done has been counterproductive to growing the economy. Freezing tax and student loan thresholds, increasing employers NIC, reducing the earnings threshold for employers NIC - none of that will improve the economy and will instead make things worse. Unemployment has gone up, growth is stagnating, youth unemployment is rising very fast.

Now, we hear that government debt costs are rising because the money markets are losing faith in the country's ability to grow so they've increased their "risk" premium that will increase the already huge cost of interest on the 3 TRILLION national debt;

We need fewer people taking out more than they're putting in. We need fewer people living of benefits. We need more people working.

We could also tackle the black economy which costs tens of billions every year, i.e. "cash in hand" traders, VAT evasion, money laundering Turkish barbers and vape shops, fake self employed delivery drivers (parcels and food etc), sellers of "duty free" booze and cigarettes.

How about we get rid of the ridiculous tax and benefit "cliff edges" where people can be worse off for working an extra shift, or taking a promotion, etc.

What we can't keep doing is ever increasing the taxes on workers. People need to be incentivised to work and incentivised to take extra shifts, promotions, work full time instead of part time. Our tax/benefits system does the opposite!

Your point is obviously correct and I am dropping hours because it’s not worth my time to pay 40% tax plus NICs plus student loan.

But on a macro scale, the government needs the revenue. The public finances are tight.

I do think that the amount should have risen with inflation and it's ridiculous that more people are being dragged into it. But on the other hand it is what it is and plenty of people wouldn't be able to afford a holiday after a lot of expensive maintenance on a house. You also only pay the 40% over £50k, so most of your earnings are not taxed that heavily.

The economy is contracting because of high tax rates and zero growth. It is crippling businesses. One small garden centre nursery I know has just checked March 2026 against March 2025 and sales to date are down by half. I know the weather has only just improved and people don't start buying plants until spring, but this is worrying. It's out of town, and fuel costs are soaring, as is the price of fertilisers, being oil-based. Scary times, and we are all tightening our belts.

I agree it’s rubbish, and the tax brackets haven’t increased with inflation, so we are poorer than ever with no incentive to work.
Maybe think of other ways to earn tax free income, side hustle, think you can earn up to £1000 every year before tax. Also maybe look at a selling and renovating your own to create wealth long term wealth. I would probably do that if I didn’t have a family.

Marginal tax rates are what matter as they incentivise people to work more or not.

Not long ago I was in a situation where anything less than a 35k increase in pay would leave me worse off. How on earth can that be created as intended outcome in any sensible tax system?

But as the OP says, it's a second job, and there's also commuting costs to deduct from the wages besides the 40% tax, student loan deductions and national insurance.

I think we should be like some other European countries and allow commuting costs to be eligible for tax relief, as it's nonsensical to effectively tax people on essential costs of working like commuting etc.

I lose about £25,000 net in benefits for earning over the £100k threshold.

Including the 60% tax rate created by the loss of personal allowance - I need to earn about £150,000 to have same net pay as £99k plus benefits.

Wild. Half the people i know are working part time as a result.

Can I ask what a " fake" delivery driver is?

of course it is counterproductive in growing the economy. Reeves doesn’t get it.

Someone with the right to work in the UK rents their account out to someone who can’t legally work here.

But if she spent more, those businesses would employ people who pay tax and then pay corporation tax at the end of the year - in theory the overall tax take could be more of less the same, plus those employed people might need fewer benefits?

Ah ok. Yeah those are a PITA

I think freezing tax thresholds for so long is totally wrong. For those of us on a low income it hits disproportionately. The freeze has meant an increase of around 25% tax for those who struggle to pay basic bills and would not dream of a long haul holiday. Governments used to increase the percentage rate of tax, which is much fairer.

Where does funding public services fit into your equation?

Austerity, Brexit, COVID, the Ukraine and now Iran wars are also major factors in our economic situation.

As for your example of the second job - most people in minimum wage jobs are not going to be paying higher rate tax on their earnings and will be working the role full time so commuting costs won't have such a disproportionate effect as the rather misleading figures you have cited.

We need more people paying in.

Most people are already being squeezed.

The burden is smaller for everyone if it's spread around.
Let's get people working. Let's get the economy growing. I'm still waiting to see what Labour are doing to help this.

At the other end of the scale too, the country needs the entrepreneurs, business owners and high earners as they are the ones that actually pay the most tax, spend money and create jobs. If those people feel it’s not worthwhile working longer hours, expanding or even continuing their business then the knock on consequences can be big.

Firms look to be cutting back at the moment, and that can’t be good for economic growth. Fewer jobs available, more benefits needed. No proper incentives on the smaller scale to earn more than £100k or turnover more than the VAT threshold and presumably that translates to the way way higher earners too

I didn't say it is a sensible tax system. I said it should have risen with inflation. 40% is a very high tax rate to apply to people only around twice minimum wage in a full time role. I also don't believe in the cliff edges such as the 100k earnings and £1 over the weekly amount for carers allowance. They should be tapered, like child benefit is.

I am merely pointing out that we all have expensive years for various reasons, so that might mean you can't afford a holiday when you usually can.