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.

I understand the extra tax paid in your first year but in second & subsequent years no extra tax is paid. You end up paying tax in the current tax year (like PAYE) when previously if you were self-employed you paid last year's tax in the current tax year.

But your just paying the tax a bit sooner because of the payments on account. By the time the first payment on account is due, you're 10 months into the tax year, so will have earned 10/12ths of the profit, but are paying 6 months worth of tax, the second payment in July being 4 months after the tax year end. So you're still never paying "in advance" - it's always in arrears.

Compare that with someone on PAYE who pays tax every month, so pays the tax several months sooner than a self employed person would.

You may be paying 1.5 years worth of tax, but you're 1 year and 10 months in, so it's still paying in arrears.

I get that, but not sure why is it being disputed that someone has paid £85k tax out of £150k earnings? It’s entirely possible if the £85k doesn’t all relate to the same tax year but is being paid to HMRC out of a single tax year’s earnings.

In that case the tax and NI structure needs to be re-jigged to make it more attractive to employers to spread the work over more people

@MynameisnotJohn Completely agree. It doesn't necessarily make sense from a business perspective to have more people on fewer hours to cover the work. Which is why I think policies like this are so great because they are encouraging individuals to make choices that redistribute wealth (or the opportunity to gain wealth ie the hours available to be worked) so that instead of a few very well paid people being really well off, more people can have those opportunities.

And whilst employing two people to cover the same hours is more expensive in terms of management and so on, you might well find between them those two people get more done at a higher quality level than one person running themselves ragged.

I think governments will need to get pretty smart with all of this in the coming years so that we don't end up with far more people having their jobs, or potential future jobs, taken by ai, leaving them with extremely limited employment opportunities whilst others work long hours in ai-proof roles.

I do not think you are redistributing wealth though, just decreasing it for all. If I work less and pay less tax and consume less overall, I am simply doing a bit of potential value destruction. Like clean my own house, buy less luxury goods, decide to not move house and pay stamp duty again, wear same old clothes, buy less expensive food. My quality of life is the same, but less purchasing is leading to fewer jobs not more. And my employer isn’t getting anyone else in either.
And for many people, going officially part time actually translates to cash in hand jobs and increasingly includes people like teachers who are tutoring.
There comes a point when the tax system is so ridiculous and politicians do not pay their taxes (looking at Rayner and now Polanski) and plenty of people find ways to not pay the full amount.
Hence all the research has always showed that a simple tax system and not too high rates actually leads to greater tax take overall.

Depends. If I had nothing else to do then probably. If I had something better to do then no. It the opportunity cost to your time. If it was discretionary then I would sometimes do it, sometimes not

Precisely…thank you!

Up until 2024 many businesses (partnerships) didn’t have a year end aligned with the tax year end of 5th April (ours was 30th June)
This changed in April 2024 known as basis reform, as a result I am actually paying tax in advance and will be for 5 years from 2024.

A big problem with people reducing their hours is when there isn't a ready supply of additional, qualified/experienced workers to make up the hours. This is a very real problem with GPs and dentists and is contributing to the waiting lists and difficulty in getting appointments, etc.

If all such professionals are going to work half time, then we should have doubled the number of Uni/training places, but we didn't.

They are not paying £85K tax on £150K earnings. They will not even pay £60K on £150K earnings. In a given tax year they might pay more but it will all shake out in the wash.

You not however paying £85K tax on £150K earnings but moving from paying tax of less than £60K per annum in arrears to paying £60K per annum in the current tax year. It's a cashflow issue not an increase in tax.

But if that’s £60k tax, that’s still 40% tax on everything she’s earned. And she probably didn’t make provision for any extra.

I’ve just had my P60 and paid 43% tax last year, and when I do my self assessment I normally owe a bit more. It’s still a huge chunk of your paycheck, when you have to pay commuting costs, childcare, in the case of a GP possibly professional costs and courses also.

Unfortunately my job doesn’t really allow for part time in a meaningful way, and my childcare for two preschoolers is almost £5k a month now (we get 15 free hours for my eldest now which helps) and so I can’t sacrifice anything to my pension

My former employer/department only paid salaries reaching the 40% tax rate to people on personal contracts, who were expected to work ‘reasonable’ overtime without pay.
About a third of us who were offered this deal declined the opportunity, most agreed to it. Depends on your situation, ambition and how much you enjoy the work I suppose.

This. It’s also so fucking stressful. They fail to get your tax code right in time and then you are scrabbling around to find the extra tax / make pension contributions at the end of the year. My basic is £150k. I salary sacrifice down. I don’t know if I am going to get a bonus until the end of the year. Historically I get a significant bonus but there is no guarantee. When I get the bonus for going above and beyond and basically barely seeing my kids the majority of it is taken off of me. I might as well work less which is counter-intuitive for a government apparently trying to grow the economy.

And this idea of we’ll just put it in your pension - it’s so short sighted. I do but I don't need to retire with a £2m pension pot (which only defers the tax btw as I’ll pay it on the way out). I need the money now to pay my bills and put back into the economy. My pension isn’t even invested in UK companies so there is no help to the economy there either. I would prefer to have the money now and spend it at the hairdresser, with a gardener etc. all of which will improve my local economy.

I rounded up for simplicity. Nobody earning £150K per annum will pay as much as £60K combined income tax & NI. I didn't include deductions which for a GP will be at least a couple of thousand a year for BMA, MDU, RCGP, GMC etc
It's the norm that those earning the most pay the highest rate of tax. You are among the 16.8% who are higher rate taxpayers.

It is the patriarchy kicking in to punish successful women essentially. Make the higher earning women Aunts and the poor Handmaiden’s at the bottom and top up with all sorts of benefits at the bottom. I have two girls. I really do not know what to advise them to do in this country. It seems like being ambitious and having a family of your own is dead. Leave the top jobs to the men and go part time. Fucking disgraceful pile of sexist crap from both Tories and Labour.

Sorry for being a bit dim but can you explain this to
me please? I just had a payrise and because my bonus paid out in full, this tax year I will earn £100,370. I was planning on putting extra in my pension to bring it below £100k as I know they take the 20% off childcare and start eating in to your personal allowance but is this enough?? We already lost child benefit a few years ago. Thank you!

Those are jobs that people spend years studying, competing and training for, and take over your life and free time. And if they didn't, they wouldn't be subsidising people who don't work that hard, and insulted for it at the same time.

Don't bite the hand that feeds...

Ironically, the reason I got my payrise is because the company I work for wanted to address the gender pay gap. I got 20% and my female staff all got the same. Wasn’t sure what to make of this, I thought on the one hand it’s quite a radical thing to do but then on the other, it’s a tacit admission that they haven’t been paying the women enough. Our gender pay gap data is the same as the UK average.

I do some extra hrs as a higher rate tax payer, as i’m buying a house and every little helps.

Yes this should ensure you are still eligible for the 30 free hours and tax free childcare.

Your adjusted net income needs to below £100k - pension contributions can be used to lower your adjusted net income.

If your bonus has been paid out in April, you may find HMRC try and stop the payments and claim you will earn >£100k this tax year. You will need to tell them you will have an ANI of under £100k. This can take some negotiation, or so I have heard.

@PrettyDamnCosmicI’m fairly sure when I earned this I paid £60k ish tax. As I mentioned before, private healthcare, dental, wellbeing benefits are all taxed. So the total bill was about £60k

I wish... I wish they had some brain power to understand this.

But no, they've seen last Thu and their response? Oust Starmer to move further to the left. You couldn't make it up