Reduced Tax for High Earners

[shortfamily61]

Everyone has slated the Boris promise of tax reductions for £50k+ and everyone is slating it. I have just nudged into high earner but just want to get it out there that earning more does not immediately = you can afford to pay more tax.

Because I earn more, I get no free child care, I get no tax credit and because I breached £50K, I've just had to pay back £3,700 (in one hit) for all my child benefit. I save this in an account for my son (I do not benefit from this money), I never knew I was not entitled to child benefit. When I asked tax office, even they sent me apology for not telling me but they were quite happy to charge me fines for not paying back immediately for claims in 2016!!! I needed a loan to pay tax man!! I have worked out that if I was only to earn say £25k I would pay marginal tax (currently pay £1200), I would get maximum benefits and be £273 better off a month.

I have tried to bring myself up from a "working class background" and am happy to pay tax for what I earn but am frustrated when people think that bettering yourself immediately means I must pay more. I am not a millionaire - I pay my tax and a reprieve for "middle earners" who work hard for their money is a damned good idea for me. I spend more if not taxed as much and I keep the economy buoyant so why berate me.

You've got a bit of a self contradictory argument going on here OP.. you're objecting to the amount of tax you now have to pay and at the same time lamenting the loss of child tax credits and other benefits.

But it's because the child tax credit system is so ludicrously generous in the first place that you're having to pay the higher tax to fund it.

On 25k a year you would not get full benefits.

Also, arguably if you’re able to save your child benefit then you don’t really need it. It makes such a huge difference to some families’ ability to make ends meet. And that’s what it’s for

None of it makes any sense. If you always saved the CB, why would you need to take out a loan to pay it back?

Yeah, there's a lot wrong with the way individual taxes are set up, no doubt. But we'd ALL be paying a lot less if the big companies paid the
amounts they're supposed to. We're all basically paying the money they don't want to bother with.

Our tax system is full of weird effects.

The marginal tax rate between £100 and £125k is 60% because of the loss of personal allowance. In fact, 62% once you take into account national insurance (which is a tax in everything but name).

www.theguardian.com/uk-news/2018/nov/03/tax-trap-budget-children

Practical example with an online tax calculator like listentotaxman.com/110000?yr=2019
If you earn £100k, you get £66,539 net a year
If you earn £110k, you get £70,339

I.e. you earn £10k more but get taxed £6,200 on those £10k. £6,200/£10,000 = 62% marginal tax rate

Something similar happens with child benefits and probbaly with other benefits I am not familiar with. The Guardian link explains it with some examples.

"[on child benefits]
For every £1,000 you earn over the £50,000 you pay tax at 40% – or £400 – plus you lose 10% of your child benefit – £179. That is £579 in total, or an effective tax rate of 57.9%."

I believe a fair tax system should be progressive. I.e. the marginal tax rate should stay the same or go down as your earnings increase, it shouldn't jump up and down because of these arbitrary thresholds.

E.g. someone earning £130k pays a lower marginal tax rate than someone earning £110k. Not fair.

Someone earning £90k pays a lower tax rate than someone who earns £50k and has just lost child benefits (as per the Guardian link). Not fair.

Etc

But we'd ALL be paying a lot less if the big companies paid the
amounts they're supposed to.

We'd be even better off if the black economy was properly tackled. Far too many tradesmen etc happy to do jobs for cash, aided and abetted by householders happy to avoid paying VAT. Not to mention duty free booze and cigarettes being illegally sold by people wanting it on the cheap. The tax evasion loss in the black economy is far more than large corporate tax avoidance.

Hotchox - what big companies are you accusing of not paying the amount they’re “supposed to?” If so, why are HMRC not enforcing the law?

Or is that just a cop out cos you want to have a magic money tree where we don’t pay any tax but get great public services.

The companies often accused of tax avoidance are doing nothing wrong, they follow the tax laws in place and pay what is due according to the law. To try to change the laws to make them pay more is virtually impossible. A company can change where it's registered for tax, if it doesn't like the new laws it can move it's tax registration in no time, why else does Luxembourg have so many companies registered there?

A single simple solution does not exist, if it did Governments around the world who are struggling with this problem would have implemented it.
Those who grandstand complaining about it certainly never offer any solution, just quote some random figures of billions of imaginary uncollected tax that never existed in the first place.

Those who grandstand complaining about it certainly never offer any solution, just quote some random figures of billions of imaginary uncollected tax that never existed in the first place.

Even worse, they're often the ones happy to pay a tradesmen in cash to save themselves VAT which also means the trader doesn't pay tax or NIC either.

@karmelo - Tax avoidance in many forms is prohibited in the UK eg the GAAR and BEPS. Also many types of tax avoidance are legitimate ways of structuring a business- it makes no difference for UK tax if a business is incorporated in Luxembourg if it is operating solely in the UK. companies incorporated in jurisdictions like that generally have roles in international businesses which should be taking place outside of local tax laws.

That’s not including your pension

It’s very simple you just opt to pay more into your pension to bring your earnings under 50k my dh did this and we kept the CB. Win win.

I don’t think you’ve done your sums right. I earn £25k as a single parent and I would be significantly better off (even after paying childcare) on a salary of £50k with no child benefit.