Clash between high income tax thresholds

[Charmanderchick]

Is this common knowledge as I’ve only just become aware of it? Apparently when you reach the Scottish high tax threshold of about 43k you pay not only the 41% tax on it but also national insurance of 12%! If you were in the rest of the uk, once you reach high rate tax of 50k your ni reduces to 2%.
I know there’s bigger problems in the world but I’ve worked long and hard for a recent promotion only to realise there will be little financial benefit of a lot more responsibility, with a marginal tax rate of 54% come the spring and pension of 10% on top of that. I honestly think I would be better earning 5k less a year, qualifying for universal credit and the child payment.
Surely national insurance In Scotland should be aligned with the tax rates this makes no sense.

Do you realise it's only on the amount over that you make? What salary are you on?

Yes I realise it’s only the income from about 43k to 50k but it disincentives taking on extra work that pays within that threshold as you take home so little if it.
I work in healthcare, constant daily requests to work extra, cover shifts, maybe it might be more attractive to do that if I wasn’t going to lose a huge amount of that wage in tax? I appreciate it’s a good wage but there’s not much leftover when it’s a single income supporting a family.

Putting the principle to one side, have you considered any salary sacrifice options you might have - e.g. pension contributions etc?

Already pay nearly 10% nhs pension and while it’s a good idea I really need the money even if it’s far less than what I thought it would be.

I'm not quite in the £43+ tax band but I took a promotion last year and I'm actually £20 a month worse off, I couldn't believe it when I worked it out as the new job has been much more responsibility and stress! With tax, NI, pension and student loans I don't see any of my payrise (which was only about £1k as moving from top of one band to bottom of the next). I can only hope that I end up better off as my increments go up.

I'm still better off than I would be living in England though.

Can you feel good about contributing to the Scot Child Payment? You are supporting the most vulnerable children.

I did not know this and i think it would affect me. Hrmmm, i need to think about this. How confusing.

I did the maths once - if you earn over £27,500 you’re worse off in Scotland.

National Insurance isn’t devolved so it’s a UK Govt decision unfortunately! A bit annoying.

Yes!
we were talking about this at work last week as we’ve got someone (relatively junior) relocating from an office England and their new line manager was wondering if they’ve realised yet that they’ll be worse off living in Scotland.
i think I worked out that it costs me a 4 figure sum more in tax / NI because I live north of the border. I try to pay more into my pension to avoid/reduce it. It feels like we should get a Scottish weighting on salaries to compensate in the same way people in the SE get a “London” weighting.

This can't be true for everyone as I earn quite a bit more than that and I'm still better off in Scotland. It's NI, pension and student loan that tips my wage,my tax is actually still lower than my English equivalents.

Also many people on that wage bracket will be entitled to the Scottish Child Payment too which is an extra £100 per month per child, which is significant.

Ni is set at the UK level you don’t pay more in Scotland. On £50 the income tax differences are significant with a Scot paying approx £1500 more.

At the £27500 level the difference is marginal but in Scotland you pay a little more. At £40k it’s more than £500 pa difference.

Then you have students loans kicking in much earlier.

I understand about national insurance being reserved.

Student loan repayment threshold is marginally higher in Scotland £25375 vs £25000. But it creeps up quickly, I suspect this combined with pensions means I haven't seen any of my payrise.

I found this out when DH got a promotion. He falls into that bracket and between tax, NI, pension, student loan and CMS (not complaining about that AT ALL before anyone starts) he takes home about £100 extra a month. It honestly isn't worth the extra hours and responsibility but it's a stepping stone for him so it's worth it in the long term.

Dont forget after £50k you then lose your child benefit incrementally so we'll be hit by that even once the NI goes down, should either of us ever earn that much!

Also in this bracket - in general it's always a good idea to consider the real take home pay impact of promotion - especially if you can see that you'll be at the revised level for a good stretch. Not always feasible to turn down a promotion either -

Marginal traps for step ups are a feature of all tax and benefit systems and with all the various things to consider with different means test criteria for different benefits/loans/vouchers it's very hard to get accurate information on the impact so easily comes as a shock.

Also many people on that wage bracket will be entitled to the Scottish Child Payment too which is an extra £100 per month per child, which is significant.

Only if you're getting other benefits too, there can't be many people earning £30k+ who still qualify for UC or tax credits? I accept there will be some but not many.

Probably only those still on the old tax credits.

This is a good point and one of the reasons I can accept paying the higher Scottish tax rate.

what I struggle to accept is being a pawn caught between the two tax systems. The only fair way I can see is when you reach the Scottish high tax threshold is for your national insurance to drop in the same way as it would at the English threshold from 12 to 2%.

To have a higher marginal tax rate than people earning many times my wage is not a progressive system and in my mind wrong

The Scottish threshold for NI is exactly the same as England there is no difference. It drops to 2% at exactly the same point, only tax thresholds differ. No one is paying more NI then they would in England.

Yes that's the point isn't it, Scotland wants the extra tax revenue, they don't want to offset the loss.

Those saying noone is paying more NI are missing the point, its the misalignment of when the Scottish vs English higher rate income rax band hits which means a Scottish taxpayer on say 45k will pay more combined tax and NI than their English equivalent. It'll be even worse in April when Scottish income tax rates go up another 1%.

The problem isn’t the NI though surely, it’s the Scottish rates/bands?

I’m not missing the point I’m paying more tax because of the tax bands nothing to do with NI. If the Scottish government didn’t play around with the tax bands then I’d be paying the same as I would in England. Marginal take is higher but it’s not the UK governments job to align NI to ensure that the Scottish tax payers pay overall the same as the English because of decisions taken by the Scottish government.

For me this means I do everything I can to maximise pension contributions to reduce the impact with the view to drawing down at much more beneficial tax rates in the future when income drops to a much lower level. Whereas if tax was lower I’d probably pay less into my pension.