AIBU to refuse extra hours when most of the pay goes in tax?

[oldFoolMe]

Would you work extra hours if you had to pay 67% tax on it? Thats without additional childcare, or commuting costs.

Indeed. If someone is earning £120k and drops their income (stops working so many hours or puts in their pension) to below £100 to avoid paying 67% tax the government gets no extra money. If they dropped their income tax rate to even 45% a the person kept their hours the same the government would be £9k better off.

Generally no and I do turn down work in Feb and March because of this.
but what are your pension contributions look like? You could put it in your pension to give it a boost

The top 5% pay 50% off income tax! So yes, it affects everyone!

But perhaps this number would be higher if there wasn’t a cliff edge there - imagine if 10% of tax payers were earning and paying tax on £110k because they weren’t being fucked by earning an amount in a particular window.

But the issue is that this 5% pay more income tax than the entire bottom 50% combined. They literally bankroll the majority of the population. If they start paying less tax then everyone else is in deep trouble.

I’ve dropped a day at work to pay less tax. It wasn’t worth my while.

Interestingly its the lowest and highest earners paying the highest percentage that then end up going part time. UC claimants in effect lose 67% of any money earned, without childcare so may even be worse off. 20% tax, 8% NI then 55% taper rate. The highest tax payers pay above and beyond anything reasonable and lose childcare and child benefit so no point in working full time to be marginally better off. What a flawed system. I’m somewhere in the middle not applying for promotion, with the additional stress and need to be on call for it to take me into a higher tax bracket.

This is what people miss… incentivising this group to work more is in everyone’s interests.

It’s madness to have created this income band in which working more delivers so little - or even costs you money.

Nope, I lowered my hours. Not putting in 100% time/effort for less than 50% reward.

I think it depends on whether or not any money would come in useful.

If the extra stress outweighs the money, don't do it.

Same here - it’s not worth me working 5 days a week as it will take my salary over £100k. Also no point me trying to get any more promotions as again it will take me over the £100k.

I’m loving people earning over £100k describing themselves as slaves! 🤣

I’ll grab my tiny violin, you nip over there and see if you can get a bit of perspective.

Gosh that’s terrifying.

Or you could just be grateful that they make such huge contributions to the state and that you benefit from…

“I’ll grab my tiny violin, you nip over there and see if you can get a bit of perspective.”

Thanks, I am getting lots of pleasure playing my cello on my day off now. And using some of it to manage my investments in my ISA as that is more lucrative than working 10 hour plus days. It is funny how much money you save when you actually make time to manage your own spend wisely, rather than working 24/7 for everyone else’s benefit.

If you are nearing retirement and you pay into your pension pot it’s worth remembering that you can withdraw 25% of your pot tax free from 55-57 years old. So pay 67% tax now or put the money tax free into your pension and get 25% out tax free in the near future while still investing the other 75%.

It is terrifying as we are driving those people abroad. Or incentivising them to retire or work fewer hours.

Beautifully put.
I done blame anyone that makes these decisions in fact people would be mad not to.

Exactly because of the 60% tax trap

Right, but the 55% isn't a tax, its a reduction in benefits. I see what you're saying, that there's no incentive to earn the additional money, but I think saying most of the pay goes in tax is misleading.

Thats bad. How does it work out like that?

I don't can't have children but if I'm asked to work overtime, I ask for TOIL instead of payment.

Um?!?

well it doesn’t affect them in paying it, but it does rather affect them if the 5% decide not to.

Only if I could put the money in my pension to avoid that marginal tax rate. Otherwise no.

@MandemChickenShopim assuming because you lose free childcare at 100k