Autumn Statement

[GS250]

Who on Earth earns £125k+ anyway?

Apart from the obvious higher profile types, I guess plenty of top lawyers, bankers, medical professionals are within this range.

Theres always been a 'tax the rich' feeling throughout certain political movements. Have they finally got what they wanted?

I can imagine a lot of those I mentioned above will be heading towards the Libdems come the next election.

 

[Bletchleyite]

I thought the purpose of His Majesty's Opposition was to be against the government, not to vote for the tory budget!

The purpose of the Opposition is checks and balances on the Government. They don't have to oppose genuinely good policy.

== Doublepost prevention - post automatically merged: 18 Nov 2022 ==

I can imagine a lot of those I mentioned above will be heading towards the Libdems come the next election.

The LD are to the left of Labour (in so much as they seem to have any policy at present). So no, they won't. Most people with that sort of earnings level have a handle on economic policy and are likely to understand this and that it's not going to last forever, even if they don't *like* it.

 

[najaB]

I thought the purpose of His Majesty's Opposition was to be against the government, not to vote for the tory budget!

The purpose is not to oppose for the sake of opposing, that would be counter to the best interests of the nation.

The purpose of the opposition is to shine a spotlight on what the government is proposing in order to keep them honest (or as close to that as is possible for a Tory government).

 

[yorksrob]

Who on Earth earns £125k+ anyway?

Apart from the obvious higher profile types, I guess plenty of top lawyers, bankers, medical professionals are within this range.

Theres always been a 'tax the rich' feeling throughout certain political movements. Have they finally got what they wanted?

I can imagine a lot of those I mentioned above will be heading towards the Libdems come the next election.

£125k+ a year is still a very comfortable salary.

 

[Bletchleyite]

£125k+ a year is still a very comfortable salary.

And we aren't talking about anywhere near reducing them from £150K to £125K i.e. a 100% rate. We're adding just five per cent to what they are paying on that band.

It's basically an extra £100 a month if you're on £150K. If you're on £150K, you spend £100 like it's a tenner for anyone else unless you've got particularly badly managed finances. They will have sucked up mortgage increases in excess of that.

 

[Wynd]

Debt interest is set to exceed EVERY departmental budget bar the NHS.

Bear in mind who issued a huge amount of UK Debt as index linked, yup, Rishi Sunak.

The torys cannot be trusted with the public finances. Labour are little better.

 

[yorksrob]

The torys cannot be trusted with the public finances. Labour are little better.

Maybe, but the Tories have had enough chances to get it right. Time for someone else, even if they don't appear much better

 

[DustyBin]

Weight tax on vehicles seems a very good idea. Would the manufacturers figures be trusted?

I suggest vehicles could be weighed at the MoT test.

I’m not opposed to the idea in principle, but what would be the justification behind it? A highways engineer I know told me that within the weight range of private cars there’s no impact on infrastructure wear and tear; you need to be at large bus and HGV weights before it becomes an issue. Obviously there are variables such as tyre width etc. to consider as well. This is anecdotal of course, but I’ll take their word for it in the absence of any evidence to the contrary. Again, I’m not opposed to the idea in principle, but such an approach needs to be justified somehow.

I don’t think manufacturers would lie about vehicle weights, it’s too easy to check (unlike emissions!).

 

[GS250]

I’m not opposed to the idea in principle, but what would be the justification behind it? A highways engineer I know told me that within the weight range of private cars there’s no impact on infrastructure wear and tear; you need to be at large bus and HGV weights before it becomes an issue. Obviously there are variables such as tyre width etc. to consider as well. This is anecdotal of course, but I’ll take their word for it in the absence of any evidence to the contrary. Again, I’m not opposed to the idea in principle, but such an approach needs to be justified somehow.

I don’t think manufacturers would lie about vehicle weights, it’s too easy to check (unlike emissions!).

Lamborghini Hurucan 1,553 kg

Entry level Mercedes E class 1,650 kg

Ford Kuga entry level 1564 Kg

Mid Range Ford Transit 1750kg

Also...weights bar the Lambo are going to be a fair bit higher when laden with 4 passengers or goods. (The Lambo is 2 seat with barely any luggage space).

Wonder what that would equate to if we were to tax purely on weight?

 

[Wynd]

Maybe, but the Tories have had enough chances to get it right. Time for someone else, even if they don't appear much better

Agreed. There is also no mandate for what they are now doing.

 

[Phil56]

I can imagine a lot of those I mentioned above will be heading towards the Libdems come the next election.

Didn't the libdems decide that around £75k were higher earners who should be taxed more?

 

[yorksrob]

Agreed. There is also no mandate for what they are now doing.

Agree with that as well.

 

[Phil56]

No, it doesn't. It's pointless complexity, creates very high effective rates in narrow taxation bands, and you can easily claw it back by fiddling with the bands of the upper levels.

It's the same with means-testing things like child benefit. It adds complexity, and you can easily claw it back in taxation. Easier just to give everyone the same and claw it back by changing tax bands and rates.

Definitely not. They should simply be paid properly. Simplicity in the tax system so people can easily understand what they're paying and why is important.

I agree with all that. I'm an accountant and deal with these crazy complexities every day. I and my colleagues despair whenever the politicians make the tax system even more complex. We've got a "office of tax simplification" which does beggar all and is toothless. All the tapering of the PA and child benefit clawback, and loss of childcare at £100k do is persuade people to take action to avoid the cliff edges, such as reduce working hours, increase pension contributions, etc. Often the end result is HMRC getting less tax rather than more when people take action to avoid the stupidly high marginal "tax" rates and loss of benefits. The early retirement and part time working of GPs and dentists is a case in point that caused severe detrimental consequences in terms of shortages of GPs/dentists yet brought in next to nothing in tax revenue from them.

We're now bracing ourselves for chaos over the next couple of years with hoards of "little old ladies" having to register and submit tax returns because their dividends are over £500 or their capital gains are over £3,000. HMRC helplines won't be able to cope with the increased volume of calls, especially as the crazy making tax digital is imposed for sole traders and landlords in 2024 at the same time. HMRC will impload in April 2024. You read it here first (although it's also widely forecast on tax and accountancy forums!). The whole point of the nil rate bands and exemptions was to remove the chickenfeed from the tax admin system. It can't be worth the admin/processing/support costs to get £100 dividend tax from a little old lady with dividends of £1,500!

 

[yorksrob]

I agree with all that. I'm an accountant and deal with these crazy complexities every day. I and my colleagues despair whenever the politicians make the tax system even more complex. We've got a "office of tax simplification" which does beggar all and is toothless. All the tapering of the PA and child benefit clawback, and loss of childcare at £100k do is persuade people to take action to avoid the cliff edges, such as reduce working hours, increase pension contributions, etc. Often the end result is HMRC getting less tax rather than more when people take action to avoid the stupidly high marginal "tax" rates and loss of benefits. The early retirement and part time working of GPs and dentists is a case in point that caused severe detrimental consequences in terms of shortages of GPs/dentists yet brought in next to nothing in tax revenue from them.

We're now bracing ourselves for chaos over the next couple of years with hoards of "little old ladies" having to register and submit tax returns because their dividends are over £500 or their capital gains are over £3,000. HMRC helplines won't be able to cope with the increased volume of calls, especially as the crazy making tax digital is imposed for sole traders and landlords in 2024 at the same time. HMRC will impload in April 2024. You read it here first (although it's also widely forecast on tax and accountancy forums!). The whole point of the nil rate bands and exemptions was to remove the chickenfeed from the tax admin system. It can't be worth the admin/processing/support costs to get £100 dividend tax from a little old lady with dividends of £1,500!

Thank goodness for the person who invented PAYE !

 

[GS250]

Didn't the libdems decide that around £75k were higher earners who should be taxed more?

Stand to be corrected then. I thought they were very much the party of social loonyism but economic flair?

 

[bib]

Lamborghini Hurucan 1,553 kg

Entry level Mercedes E class 1,650 kg

Ford Kuga entry level 1564 Kg

Mid Range Ford Transit 1750kg

Also...weights bar the Lambo are going to be a fair bit higher when laden with 4 passengers or goods. (The Lambo is 2 seat with barely any luggage space).

Wonder what that would equate to if we were to tax purely on weight?

I came across something that said road damage is proportional to axle weight^4, so a directly proportional tax would put huge fees on HGVs. Though if you just applied it to cars it might have some interesting effects.

 

[MikeWM]

They really need to drop the personal allowance tapering, it's silly as it applies a super tax to a narrow income band. Just either increase the 45% rate a bit or move the threshold down slightly further to get the same income.

It turns out the 45% band will start at £125,140 rather than £125,000 - most of the media just reported it using the rounded number, and I didn't actually watch the statement for the sake of my sanity (Hansard suggests Hunt used the correct figure in his statement). So I guess they did think it through slightly at least.

100% agree that having an effective 60% tax band sandwiched between the 40% and 45% band is very silly, even if it is something only about 3% of taxpayers will actually encounter.

 

[Bletchleyite]

We're now bracing ourselves for chaos over the next couple of years with hoards of "little old ladies" having to register and submit tax returns because their dividends are over £500 or their capital gains are over £3,000. HMRC helplines won't be able to cope with the increased volume of calls, especially as the crazy making tax digital is imposed for sole traders and landlords in 2024 at the same time. HMRC will impload in April 2024. You read it here first (although it's also widely forecast on tax and accountancy forums!). The whole point of the nil rate bands and exemptions was to remove the chickenfeed from the tax admin system. It can't be worth the admin/processing/support costs to get £100 dividend tax from a little old lady with dividends of £1,500!

They may put something simpler in place. For a while I was in a position where I had to pay the 40% tax rate on some savings income (I'm not now). I just told them about it and they approximated for it by changing my tax code, I wasn't asked for a full tax return.

I do agree, though.

 

[Phil56]

Thank goodness for the person who invented PAYE !

It used to work quite well until the recent changes. Now it's a nightmare getting PAYE codes right for dealing with the child benefit clawback and personal allowance tapering away and pension contribution relief. The PAYE system simply can't cope with it and is being metaphorically held together with blutack via manual code adjustments. The PAYE system isn't picking up employees earning over £100k within the tax year, so for the first year or two earning that much, the employee ends up massively owing tax, likewise child benefit. That's why those earning over £100k or over £50k with child benefit now have to complete and submit self assessment tax returns each year, simply because the PAYE system can't cope. Likewise with people with multiple employments, i.e. 2+ jobs or a 1 job alongside a self employment or a string of short term jobs lasting just a month or two (typically agency or contract work). It's the same reason why so many were excluded from Covid support - the covid support schemes couldn't cope with multiple jobs nor a job alongside a self employment meaning lots ended up excluded unfairly. Also pensioners too, PAYE codes are constantly wrong when trying to account for a state pension alongside a workplace pension, alongside other taxable income such as interest or dividends - again meaning SA returns are needed to pull it all together and get the tax right.

 

[yorksrob]

It used to work quite well until the recent changes. Now it's a nightmare getting PAYE codes right for dealing with the child benefit clawback and personal allowance tapering away and pension contribution relief. The PAYE system simply can't cope with it and is being metaphorically held together with blutack via manual code adjustments. The PAYE system isn't picking up employees earning over £100k within the tax year, so for the first year or two earning that much, the employee ends up massively owing tax, likewise child benefit. That's why those earning over £100k or over £50k with child benefit now have to complete and submit self assessment tax returns each year, simply because the PAYE system can't cope. Likewise with people with multiple employments, i.e. 2+ jobs or a 1 job alongside a self employment or a string of short term jobs lasting just a month or two (typically agency or contract work). It's the same reason why so many were excluded from Covid support - the covid support schemes couldn't cope with multiple jobs nor a job alongside a self employment meaning lots ended up excluded unfairly. Also pensioners too, PAYE codes are constantly wrong when trying to account for a state pension alongside a workplace pension, alongside other taxable income such as interest or dividends - again meaning SA returns are needed to pull it all together and get the tax right.

I'm unlikely to have children or earn over £50k, so it works for me for the time being !

 

[Phil56]

They may put something simpler in place. For a while I was in a position where I had to pay the 40% tax rate on some savings income (I'm not now). I just told them about it and they approximated for it by changing my tax code, I wasn't asked for a full tax return.

I do agree, though.

Yes, indeed, they have the facility via the online personal tax account for taxpayers to manually enter interest, dividends, etc., but a lot of elderly people won't be computer literate enough to do that, and many won't even have a computer to do it. Such people currently phone HMRC to give them their figures. I know a lot currently submit tax returns voluntarily just to get the tax right as PAYE codings are often wrong. As a firm, we generally do voluntary tax returns for such clients as we find we spend less time (therefore cheaper for the client) to do a tax return rather than advise HMRC of figures in another way which often results in a wrong PAYE code, which then means further communication to get them to correct it.

The point is that huge numbers of people currently don't have to log in nor phone because they fall under the thresholds so can stay outside of the tax system as there's no tax on their modest gains or modest dividend income. In 2024, such people will have to register online or phone to register or phone for support in registering online, and the HMRC call centres can't cope with today's volumes of calls, so unless they're going to massively increase their staffing levels and staff training, they'll really struggle, especially with expected huge volumes of calls about making tax digital for self employed and landlords at the same time (which is also unnecessary and will end up costing more than it generates).

 

[DelayRepay]

I agree with all that. I'm an accountant and deal with these crazy complexities every day. I and my colleagues despair whenever the politicians make the tax system even more complex. We've got a "office of tax simplification" which does beggar all and is toothless. All the tapering of the PA and child benefit clawback, and loss of childcare at £100k do is persuade people to take action to avoid the cliff edges, such as reduce working hours, increase pension contributions, etc. Often the end result is HMRC getting less tax rather than more when people take action to avoid the stupidly high marginal "tax" rates and loss of benefits. The early retirement and part time working of GPs and dentists is a case in point that caused severe detrimental consequences in terms of shortages of GPs/dentists yet brought in next to nothing in tax revenue from them.

I appreciate that changing the system completely would be really complex, which is probably how we've ended up where we are.

But wouldn't a far simpler system be to scrap National Insurance, scrap these tapers and clawbacks, and just have income tax applicable to all income whether wages, pensions, dividends, savings interest etc? There would be different bands as there are now.

Do other countries tax systems have all these anomalies?

 

[Bletchleyite]

But wouldn't a far simpler system be to scrap National Insurance, scrap these tapers and clawbacks, and just have income tax applicable to all income whether wages, pensions, dividends, savings interest etc? There would be different bands as there are now.

I'm very much in favour of this. One set of rates, applicable to all income other than sale of property without capital gain* ** in whatever form above the allowance. Though I could see a case for separate allowances for some things e.g. savings interest to avoid "de minimis" admin as mentioned above.

I'd also be inclined to change how pensions are taxed. Instead of having tax relief on contributions, these would be treated as normal income, but the actual pension would be taxed on capital gain on its investments and not on its full value, and not at all when it is paid out - basically treat it as savings at that point as it basically is.

* e.g. a used car where it is sold for less than you bought it for, as it usually would be.
** Another exception being if you sell a primary residence and buy another one as primary residence, as taxing moving house is not sensible and the capital gain isn't really capital gain in most cases as you have to pay more for the house you're buying, though there is an argument to say CGT should be applied to a gain calculated on the price difference if moving to a cheaper area or smaller house it might be too complex to be worth it.

 

[DelayRepay]

I'm very much in favour of this. One set of rates, applicable to all income other than sale of property without capital gain* in whatever form above the allowance. Though I could see a case for separate allowances for some things e.g. savings interest to avoid "de minimis" admin as mentioned above.

For savings interest, I would revert to the old system of the bank deducting at source and paying HMRC. If HMRC's computer says the bank has not deducted enough (because the account belongs to a higher-rate tax payer), they can collect the extra through a tax code adjustment. If HMRC's computer says the person has paid too much they can send it back and tell the bank to stop collecting it (a bit like the old R85 form but HMRC tell the bank rather than the customer having to fill in a form). At the end of the tax year, HMRC can re-calculate everyone's tax and issue bills or refunds as appropriate. A bit like self assessment, but done centrally because HMRC already have most of the data.

Essentially everyone would be on PAYE with as much tax collected at source as possible. HMRC's computer would work out where people were over or underpaying, and make adjustments as necessary.

As part of this I'd scrap some of the small allowances you can claim from HMRC, e.g. washing your uniform at home or the difference in mileage between the HMRC rate and the employer's reimbursement rate. I'd just assume everyone has some kind of work related expenses and cover them through the general tax free allowance.

 

[Bletchleyite]

For savings interest, I would revert to the old system of the bank deducting at source and paying HMRC. If HMRC's computer says the bank has not deducted enough (because the account belongs to a higher-rate tax payer), they can collect the extra through a tax code adjustment. If HMRC's computer says the person has paid too much they can send it back and tell the bank to stop collecting it (a bit like the old R85 form but HMRC tell the bank rather than the customer having to fill in a form). At the end of the tax year, HMRC can re-calculate everyone's tax and issue bills or refunds as appropriate. A bit like self assessment, but done centrally because HMRC already have most of the data.

Yes, I agree with that. It could be further eased by banks being required to ask you if you pay higher rate (or even 45%) tax so they can collect that at source too. If you did tell them not to then it's on you to submit a tax return.

As part of this I'd scrap some of the small allowances you can claim from HMRC, e.g. washing your uniform at home or the difference in mileage between the HMRC rate and the employer's reimbursement rate. I'd just assume everyone has some kind of work related expenses and cover them through the general tax free allowance.

Agreed, most of these complexities cost a lot to process and don't really have much benefit.

 

[DustyBin]

Agreed, most of these complexities cost a lot to process and don't really have much benefit.

In the case of the mileage rate, it has a lot of benefit for some individuals (believe me!).

 

[Bletchleyite]

In the case of the mileage rate, it has a lot of benefit for some individuals (believe me!).

There would need to be a means of people who aren't paid expenses but would be in terms of tax claiming that tax relief. 40% of mileage (or train fare etc) is still quite a lot of money.

It's the more de-minimis stuff - washing uniforms, cups of coffee when travelling and the likes - that cost a lot to process for minimal gain.

 

[DelayRepay]

In the case of the mileage rate, it has a lot of benefit for some individuals (believe me!).

Yes, someone I know is a social care worker. Their employer reimburses 10p per mile and they can claim tax relief on the difference between that and the 45p HMRC approved rate (so 20% of 35p, which I think means she gets back about 8p per mile). As she does many miles, it is beneficial in reducing her tax bill.

On the other hand, the current arrangement implies that she is subsidising her employer from her own money to the tune of 35p for every mile she drives. That doesn't sound right, especially when she's a low paid worker to start with.

The solution to this is simple: If it really costs 45p a mile to use a car for work, then the employer should be required to reimburse 45p rather than getting away with 10p. The HMRC rate would become mandatory, but would need to be reviewed to ensure it's realistic and would need to change more often to reflect changes in the cost of fuel etc.

It's the more de-minimis stuff - washing uniforms, cups of coffee when travelling and the likes - that cost a lot to process for minimal gain.

Similar to above, if people are required to wash a uniform at home, just introduce an agreed mandatory reimbursement (10p per shift?) payable by the employer. I guess you might need a higher rate for people who do particularly dirty or unhygienic jobs compared to people who work in shops etc.

 

[DustyBin]

Yes, someone I know is a social care worker. Their employer reimburses 10p per mile and they can claim tax relief on the difference between that and the 45p HMRC approved rate (so 20% of 35p, which I think means she gets back about 8p per mile). As she does many miles, it is beneficial in reducing her tax bill.

On the other hand, the current arrangement implies that she is subsidising her employer from her own money to the tune of 35p for every mile she drives. That doesn't sound right, especially when she's a low paid worker to start with.

The solution to this is simple: If it really costs 45p a mile to use a car for work, then the employer should be required to reimburse 45p rather than getting away with 10p. The HMRC rate would become mandatory, but would need to be reviewed to ensure it's realistic and would need to change more often to reflect changes in the cost of fuel etc.


Similar to above, if people are required to wash a uniform at home, just introduce an agreed mandatory reimbursement (10p per shift?) payable by the employer. I guess you might need a higher rate for people who do particularly dirty or unhygienic jobs compared to people who work in shops etc.

I'm inclined to agree with you both to be honest. The mileage rules in particular are farcical.

 

[yorksrob]

The only way forward as a country is much more self-sufficiency and self-reliance, otherwise we'll forever be at the mercy of foreign crises and imported inflation. Not complete North Korean style hermitage, just more control of the supply of the basics. Encourage domestic energy production, food production etc.