AIBU to feel disheartened by earning into the higher tax band?

[Chocolateapot]

I have finally after many many years of studying progressed in my career to just slightly above the 40% tax threshold. Unfortunately I’ve realised this now means any additional income I earn is now taxed at 40%, student loan 9% and 2% national insurance, essentially giving a marginal tax rate of 51%.

Not sure why I bothered tbh

Without fiscal drag the threshold would be 70k - keeping it at 50k builds the wrong incentives into the system

Increase your pension contributions so you remain in the lower tax band, it's always a good idea.

This.

And reflect on the times earlier in your career / life when you were NOT a contributor… when you had child benefit and were paying v little tax and NI, free nursery hours, no CT as a student etc etc. There are times in our lives when we receive more from the system, and times when we contribute more.

Of course the tax take has risen under Labour! It’s called fiscal drag!

Can somebody explain to me like I'm 5 what the deal is with student loans? I'm going to be earning over 50k soon (currently 49k) and have Plan 1 loans in Wales. Am I going to be paying significantly more or something?

Fiscal drag, ladies and gentlemen.

Ah yes. The Conservative and Unionist Party are famously a bunch of reds.

Unfortunately this means the entirety of any pay increases will be taxed at the higher rate. So a 3% cost of living increase (this is normal in the private sector over the last few years) will mean bringing home a little over 1% more each month. Take home pay going up that slowly when food, council tax, mortgage or rent are going up at many multiples of that amount is depressing.

It's not though, is it? Taxes went up under Sunak and the Tories to their highest rate since WW2.

And if you have two children who need childcare while earning over 100K then you are essentially losing 24K a year in missed 30hr funded childcare per year. It's no wonder people prefer to go part time and stay on low wages. There is literally no incentive to work hard in this country

This.
Born in a NHS hospital, as were my children. educated in state schools, given free school meals. I was mid 30s before I significantly started paying a lot of tax, before that my low paying, entry level jobs meant paying tax, but not a lot.

Could you ask your job for a pay cut to allow you back into the lower tax band?
Or where I live I get a tax return on 80% of charity donations. Maybe that will get you back to your previous earnings?

Don’t want to do that I guess? Then be happy about the fact you are still earning a lot more than plenty of people who work just as hard as you do, often in critical and life-saving jobs that you probably wouldn’t be willing to do (care assistant, cleaner, nurse, nursery teacher, etc.) and stop moaning.

You will pay 40% tax, 2% NI and 9% student loan = 51% deduction. So every extra pound you earn, the majority of it goes to the tax man.

Oh shush. If you have someone earning over £100k then you are in the top % of earners and don’t need bloody funded childcare. I mean, sure it would be nice but no-one on a career path earning that amount is going to suddenly take a step back and go ‘ hold on a minute’
Not anyone I know anyway.
We didn’t get it, and managed fine.
my only beef with that policy is that it should be a household income of £100k not just if one person earns £100k so there’s not the situation where 2 x parents can earn £90k each but still get funding.

Yes, that's just stupid. The reason we find ourselves in our current position is because successive administrations both left and right have pursued fiscal drag as a deliberate policy.

Paying BACK a loan is NOT the same as paying tax! You borrowed the money - you pay it back! It’s like me whining that paying my mortgage loan is a ‘tax’.

Benefits are capped though.

You do know that most people on benefits are actually in work. And the biggest part of the welfare bill goes on pensions.

People in the higher rate of tax used to have a very different standard of living to those on average income. Now there isn't much in it as they are paying a fortune in tax, childcare and repaying student loans! Not worth the effort anymore.

Some are but I don't believe there are many where both are working full time. Loads only work 16 hours so they can fiddle the system.

And that’s where you’re wrong. I’m in London and most parents I know are falling foul of this.

A few years ago the value of the childcare was vastly less - only £2k if under 3, and the 15 hours and £2k if over 3. Now with 30 hours from 9 months - you might be losing out on £25k a year with two kids in childcare vs about £10k two years ago.

The incentives to do something about it are suddenly much greater.

Unless earning £160k+ you are best off using pension contributions or working part time to claim the hours.

And this has serious consequences - I know a lot of doctors and they are all working part time to achieve the above. That’s a terrible piece of policy.

And ‘on £100k you don’t need it’ - £25k is a third of the net pay on £100k. Over 40% if you have a student loan. The incentives to claim it are massive - you may end up losing money for earning more otherwise.

Id also challenge the idea higher earners are expected to pay massive taxes but not be eligible to use the services they’re funding.,,

Paying taxes pays for our society to function. The issue is that not everyone pays sufficiently. And the taxes are not seen to be being spent well.
Many people do not pay their tax. A list is produced by the Government of defaulters. The person, the money owed. The amounts are diabolical.

Not some. Most.

I thought the 16 hours thing was from the tax credits system pre 2012 reforms.

I get why it isn’t moving but is is disheartening. The higher rate was supposed to kick in on high earnings, but £50k is well within middle income territory (at least in London)