Personal Taxation Discussion

[RobShipway]

Moderator note: split from

Realities of railway recovery after 2024

Labour have an opportunity to make a huge song and dance about the rail network in their next general election campaign, and from what I’ve heard from people working behind the scenes on Labour’s next general election campaign they’re planning to do exactly that. An opportunity, maybe, but no...

www.railforums.co.uk

How have you worked that out?

Having been someone in the last 10 years that has been earning over £40,000 a year prior to 2016 and since then be struggling due to being made redundant a couple of times in the last 5 years to be earning even £30,000 a year.

I had more earnings each month back in 2016, even with paying tax, national insurance and paying for private healthcare in a permanent job, than I have now in the contract work that I am doing.

Point of order, that is a progressive tax system. A regressive one is one like National Insurance where, in some form, people who earn more pay a lower percentage due to it having a cap.

Which is basically the system the current government is using.

They haven't UK income tax system is regressive the more you earn the more you pay.

ie upto £12750 you pay no tax or NI ie keep 100% of your earnings after that its on a declining curve such that at a 100k 33.7% of your income is taken from you especially if your PAYE.

perhaps they meant all things being equally ie same house, energy, food costs then the more you earn the more likely you will have disposable income but thats where tax allowance and the benefit system kicks in to help neutralise some of that deficit.

Yes correct, those that are paid below £12,750 pay no tax or NI. Those that have a yearly salary that is between £12.750 to £40,000 from the last budget and are I believe currently as well, are paying more tax and Ni than those in the £50K - £60K bracket.

You are a bit wrong on the tax front. Someone on £20,000 for example takes home just over £17,500 or 87% of their income. Someone on £200,000 takes around £115,000 or 57%.

I suggest you go and look at the Government website and amounts of tax and ni charged to those with salaries between £20K - £40K and compare it to those that are on say £50K to say £200K. I think you will find that the person on £200K is taking home after tax, ni and any benefits that they may be able to claim far more than those below say £50K.

You also have to take into account age as well. To me anyway, it seems the more that I go through my fifties, the more I seem to be paying in tax and NI even though due to circumstances my salary is lower than it was 10 years ago.

 

[baz962]

Having been someone in the last 10 years that has been earning over £40,000 a year prior to 2016 and since then be struggling due to being made redundant a couple of times in the last 5 years to be earning even £30,000 a year.

I had more earnings each month back in 2016, even with paying tax, national insurance and paying for private healthcare in a permanent job, than I have now in the contract work that I am doing.


Which is basically the system the current government is using.


Yes correct, those that are paid below £12,750 pay no tax or NI. Those that have a yearly salary that is between £12.750 to £40,000 from the last budget and are I believe currently as well, are paying more tax and Ni than those in the £50K - £60K bracket.


I suggest you go and look at the Government website and amounts of tax and ni charged to those with salaries between £20K - £40K and compare it to those that are on say £50K to say £200K. I think you will find that the person on £200K is taking home after tax, ni and any benefits that they may be able to claim far more than those below say £50K.

You also have to take into account age as well. To me anyway, it seems the more that I go through my fifties, the more I seem to be paying in tax and NI even though due to circumstances my salary is lower than it was 10 years ago.

I know how to work out tax and I also use a tax calculator. I compared £20,000 which was paying 13% and £200,000 who pay 43% . Of course someone on £200,000 takes home more than someone on £50,000. But they take a far lower percentage.

 

[JamesT]

Having been someone in the last 10 years that has been earning over £40,000 a year prior to 2016 and since then be struggling due to being made redundant a couple of times in the last 5 years to be earning even £30,000 a year.

I had more earnings each month back in 2016, even with paying tax, national insurance and paying for private healthcare in a permanent job, than I have now in the contract work that I am doing.


Which is basically the system the current government is using.


Yes correct, those that are paid below £12,750 pay no tax or NI. Those that have a yearly salary that is between £12.750 to £40,000 from the last budget and are I believe currently as well, are paying more tax and Ni than those in the £50K - £60K bracket.


I suggest you go and look at the Government website and amounts of tax and ni charged to those with salaries between £20K - £40K and compare it to those that are on say £50K to say £200K. I think you will find that the person on £200K is taking home after tax, ni and any benefits that they may be able to claim far more than those below say £50K.

You also have to take into account age as well. To me anyway, it seems the more that I go through my fifties, the more I seem to be paying in tax and NI even though due to circumstances my salary is lower than it was 10 years ago.

Assuming no extra allowances going on, as they equalised the income tax and NI thresholds, someone earning up to £50,270 will be paying 20+12% on their income over £12,570. Those earning up to £100K will be paying 40+2% on their earnings above the threshold. The £100K-125K band has an effective marginal rate of 60+2% due to the loss of personal allowance. Then at £150K we’re into 45+2%.

So I’m not sure how you can come to the conclusion that lower paid workers are paying more in tax. Of course the higher paid ones are taking home more, they earned more to start with. But the government has taken a larger chunk along the way.

 

[Bald Rick]

I had more earnings each month back in 2016, even with paying tax, national insurance and paying for private healthcare in a permanent job, than I have now in the contract work that I am doing.

That’s because you earned 25% more pretax.

Those that have a yearly salary that is between £12.750 to £40,000 from the last budget and are I believe currently as well, are paying more tax and Ni than those in the £50K - £60K bracket.

This is incorrect.
Someone earning £30k taxable income will be paying £5577.60 tax and NI (18.59% of their income)
Someone earning £40k taxable income will be paying £8777.60 tax and NI (21.94% of their income)
Someone earning £50,001 taxable income will be paying £11,978.02 tax and NI (23.96%)
At £60,000, it becomes £16,177.60 tax and NI (26.96%)
At £120,000 it becomes £45,351.10 (37.79%). Note that a sole earner at £120k pays nearly 1.5x as much tax and NI as a couple earning £60k each.
And so on.

I think you need to check your payslips to see what you are being deducted. If you are on contract work you may be on an emergency tax code and therefore been overpaying tax, potentially by a significant sum. I recommend you seek professional advice.

The simple facts are (from gov.uk) that for the following annual taxable earnings bands* you pay the following:

£0 - £12,570 0%
£12,571 - £50,270 32% (20% income tax, 12% NI)
£50,271 - £100,000 42% (40% income tax, 2% NI)
£100,000 - £125,140 62% (40% income tax, 2% NI, plus an effective 20% further income tax as you lose your annual allowance £1 per £2)
£125,140 - £150,000 42% (40% income tax, 2% NI)
£150,000+. 47% (45% income tax, 2% NI)

This is progressive throughout the range, ie for every additional £1 of income above £12,570, you pay a slightly higher proportion of the total in tax & NI.



*this is the simple version for someone whose only income is through employment. It gets more complicated with non earned income (eg dividends, interest), tax reliefs, if you are claiming child benefit, and other allowances.

 

[Bletchleyite]

£0 - £12,570 0%
£12,571 - £50,270 32% (20% income tax, 12% NI)
£50,271 - £100,000 42% (40% income tax, 2% NI)
£100,000 - £125,140 62% (40% income tax, 2% NI, plus an effective 20% further income tax as you lose your annual allowance £1 per £2)
£125,140 - £150,000 42% (40% income tax, 2% NI)
£150,000+. 47% (45% income tax, 2% NI)

That middle one is of course imbecilically stupid, and would be better handled by bringing the bottom of the 45% band down rather than stepping down the personal allowance.

 

[Bald Rick]

That middle one is of course imbecilically stupid, and would be better handled by bringing the bottom of the 45% band down rather than stepping down the personal allowance.

Indeed it is, and the Government have indeed done the first part of your suggestion, without doing the second.

 

[Annetts key]

From the topic that this was split from.. (link).

The problem is that with income tax - the biggest revenue source - the Top 1% are paying 30% of its revenues, but 42% of adults pay *no* income tax whatsoever. https://www.theguardian.com/busines...-income-tax-revenues-institute-fiscal-studies

The issue is the 'personal allowance' at £12k is much higher than, say, Sweden where it is about £4k.

We need to broaden the tax base, not keep ramping up taxes on mid or high earners. The 'high' rate of 40% (which also has NI added onto that for most people) starts at £50k - that kind of salary means head and deputy heads in schools are paying it, so are GPs and even train drivers (median salary £60k).

This incessant 'tax the rich' narrative is tiresome, it's basically saying somebody else should pay. Well, to be blunt, if you called for Covid lockdowns, if you called for longer or more severe lockdowns, if you demanded a bigger or more generous furlough bill, if you called for free Covid testing, if youbsaid all these actions, which hit the economy were "worth it", well, here's the bill - now put *your* hands in *your* pockets and contribute more towards it. You got what you wanted, now you get the bill.

If taxes are going to be discussed, then it should include ALL taxation including VAT and all the other various taxes that the government(s) use. One of the problems in this country is that there are so many different taxes that most people don’t even know about all of them, let alone know how much they actually pay in tax.

And that should include other ‘hidden’ costs that you have no choice but to pay, for example, I don’t have any so called ‘smart’ electricity or gas meters, but I still have to pay a contribution for everyone else’s ‘smart’ meters.

 

[A0]

From the topic that this was split from.. (link).


If taxes are going to be discussed, then it should include ALL taxation including VAT and all the other various taxes that the government(s) use. One of the problems in this country is that there are so many different taxes that most people don’t even know about all of them, let alone know how much they actually pay in tax.

And that should include other ‘hidden’ costs that you have no choice but to pay, for example, I don’t have any so called ‘smart’ electricity or gas meters, but I still have to pay a contribution for everyone else’s ‘smart’ meters.

No, because VAT is consumption led, therefore you have the choice whether or not and how much to consume. If you want a "new" TV or a "new" car if you buy a used one they are, by definition, not subject to VAT.

Mortgages and residential rent are not subject to VAT, nor is food (unless bought for on site consumption).

 

[Cdd89]

Indeed it is, and the Government have indeed done the first part of your suggestion, without doing the second.

The government did announce plans to remove the anomaly under Kwarteng’s proposed follow up to Truss’s mini-budget; however we all know how badly that went down, so it’s safe to say it’s kicked into the indefinite long grass for now. Funnily enough it got significant coverage in an episode of Martin Lewis’ show a couple of weeks ago.

Also, since this was last discussed, I did think of one cynical argument for it — namely that those affected by the band (without earning significantly more than it) are likely not quite rich enough to be truly internationally mobile, and can therefore be taxed at a higher marginal rate without them leaving. A bit like the arguments in favour of retaining non-dom status. (I don’t agree with either, by the way!).

 

[Ediswan]

If you want a "new" TV or a "new" car if you buy a used one they are, by definition, not subject to VAT.

Private sales of used items are VAT free. Dealer sales are subject to VAT, but often only on the profit margin.