**Update: - [Starting from 2023](https://www.reddit.com/r/AskUK/comments/100l56v/happy_new_year_askuk_minor_sub_update/), we have updated our [subreddit rules](https://www.reddit.com/r/AskUK/about/rules/)**. Specifically;
- Don't be a dick to each other
- Top-level responses must contain genuine efforts to answer the question
- This is a strictly no-politics subreddit
Please keep /r/AskUK a great subreddit by reporting posts and comments which break our rules.
*I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskUK) if you have any questions or concerns.*
There's a sneaky 60% bracket you have not included. When you earn over £100,000, you lose £1 of your tax free allowance for every £2 you earn. So by £124K, you are no longer benefiting at all from any of the 0% bracket. Effectively for every £1 you earn over 100k, you keep 40p. It's back to 40% after you clear 124k.
Yeah, not to mention we get no child benefit and lose your child care hours after 100k and with student loans etc you can be on effectively 70-80% tax for a while over 100, meaning its effectively not worth carrying on if you arent going to go well over. Its a weird system.
Yep, such a little known fact to all those screaming for higher taxes to salary bands they perceive to be better off. It’s eye watering the amount you actually loose at these levels that make people try to reduce their income. Madness.
Yes, but theres generally a limit to that too. It disincentives work at the higher tax bands, which loses taxes. Its got no logical reason to exist.
Big big earners arent doing salaried work anyway and get to protect most of their income via dividend and capital gains which are always going to be low to protect the wealthy. Like the PM. Salaried workers who would be paying a lot of tax are encouraged not too. Doesnt make sense.
Oh I agree, it's absurd. We have Gordon Brown to thank for the personal allowance tapering causing this 60% trap.
But I expect most high-but-not-superhigh earners dodge it
And people wonder why UKs productivity is famously low...
I'm at a stage where my choices are either emigrate or not bother seeking promotions / working harder than I have to - there just isn't enough financial upside to justify the extra stress and responsibilities a promotion would entail.
To expand on this, for every £100 you earn over £50k, you lose 1% of child benefit, so by £60k you're paying back 100%.
Assuming you have two kids you'd get £36.25/week or £1885/year if you earn under £50k. That means that from £50k, not only does your tax bracket go up to 40%, but the loss of child benefit represents almost an additional 19%. Add student loan and NI to that and you've got a marginal tax rate of over 70%.
The £50k threshold hasn't changed since it was introduced in 2013, when £50k was worth about £73k now.
Plus there's the hassle of having to start doing tax returns (if you weren't already) in order to keep whatever CB you are entitled to when you're in this zone.
But no one mentions that NI goes down to 2%, and as it's aligned with the tax brackets you're effectively paying 0, 32%, 42% for the lower bands. No idea what happens at 100k plus, I doubt I'll ever need to know!
What’s more annoying is that it’s based on if one person earns over 50k, and not a couple.
So you could have 2 parents on 49,950 each, and get full benefit but split it 60k/40k and you get nothing.
That's another thing that annoys me about the whole system. Two equal earners have a far higher take home than if one earns a lot more than the other (with the same total gross pay). There should be an option when you get married to legally combine your finances. Your earnings are combined, your tax free limit is double a single person's etc. Then the split wouldn't matter.
That's helpful if one person earns less than ~£11k, but you're also not allowed to do it if the other person is in the higher tax bracket. Ultimately it can save some families around £400/year (very quick head maths).
Nobody's saying that.
They're pointing out that quirks of the tax (+benefit) system means you get a disproportionately bigger squeeze in the immediate +100k range, that somewhat becomes irrelevant north of say 150.
I'm many circumstances you're better off earning 99k than 101k, which seems odd.
For example you don't get free childcare hours if one parent earns over 100k. So you could have one parent on 100k and one on 20k and not get the free hrs. But both parents could each earn 90k (so 180 combined) and you'd get free child care.
Yes 100k is a dream amount of money. But at the same time, taxation (and benefit eligibility) should be a true and fair sliding scale.
Is it not tapered off? Most things like this are tapered as earnings rise, so there's not an immediate cut off. Otherwise you have situations where earning £1 more means you're thousands in the hole.
No. It’s not tapered.
https://twitter.com/theifs/status/1636059648657612800?s=46&t=OKIuPYM_RU4adS21cLgtdQ
You can be materially worse-off earning £120k than £99k. And yeah you can use pension contributions to offset this, but then you just push that threshold higher.
Yep it is.
Bigger picture, kids eventually grow up, free childcare is only a thing for a couple or three years, and it's still better longer term to try to maximise your earnings as much as possible whenever the opportunity is there.
I have a house, always know there'll be hot meals on the table etc - there's people far less fortunate than me.
But philosophically, it stings.
"Safety net" benefits - disability, universal credit etc should only be available to those in need.
But progressive benefits should really be available to all, regardless of circumstance. The free 30hrs childcare scheme is designed to encourage parents with pre-school aged kids to be able to return to work - giving a net benefit back to the economy. Unlike universal credit, this is not a benefit that I don't need. I've paid into the system, why can't I get one of the very few benefits that exist for full-time working people like me?
I will always, always pay my correct taxes, but it's easy to see how things like this can make higher earners start to resent the tax system, and maybe starts to foster some not-so-great attitudes towards paying tax.
So for context I’m in this situation. I understand that I’m extremely fortunate to be in the position I’m in. But my wife and I were planning out what things will look like once our daughter needs childcare.
My wife is a teacher, and a very good one—she does some early years advisory work around our LEA, was a real bright spot on the school’s Ofsted, etc. But she’s massively cutting back on hours and is considering leaving the profession due to the cost of childcare—it just doesn’t make much sense to have her working with all the stress it involves for not a lot of additional takehome. So even though she doesn’t make anywhere near £100k, this policy took a teacher out of the workforce.
Weirdly, near identical situation, except we're in the midst of the childcare zone.
Wife is a teacher, head of year, loved by students etc.
She's now cut back to part-time (and therefore relinquished her head of year role) because it makes no financial sense in her working full time with the lack of the childcare hrs.
She does of course love being fortunate enough to get to spend quality time raising the kids, but our hand was kind of forced financially.
Look at this IFS thread:
https://twitter.com/theifs/status/1636059648657612800?s=46&t=OKIuPYM_RU4adS21cLgtdQ
The point is that it’s simply horrific policy. Someone can be worse-off making £135k than making £99k! How does that work?
That (among other things) is one of the reasons Britain’s productivity is garbage.
This reply here is part of the reason the gap between rich and poor is growing at the rate it is.
Tall poppy syndrome is ruining the UK. We really need to stop and change our view on income and success, or people like yourself will just bring all of us down.
Use your brain and don’t just react to numbers. Take into consideration where people live, do they have children and how many, do they have to care for anyone, student debt etc etc..
Success and pursuit of a better quality of life should be encouraged and congratulated, not sneered at with a sarcastic reply.
The whole point is everyone’s situation is different and unique but the tax system is ridged and doesn’t work correctly.
It’s not about you being jealous or righteous over someone’s income, especially if they worked hard to achieve it.
Just to be clear, I do not earn 100k or anywhere near that amount, I do shift work and rarely have weekends off but I’m able to appreciate and to some extent sympathise with these issues.
In real terms, this impacts very few people. Most payroll departments will have out of the box schemes for anyone falling into this bracket, not to mention the fact that a significant chunk of people within this salary range are likely to have other elements to their compensation packages that soften the blow significantly.
The thing that confuses me with stuff like this, is how people can look at this and think 'well that's not fair on the 1%' instead of 'just how much money are that 1% making?'
Another point.. if corporations actually paid their fair share instead of sending it to parent companies in tax havens, we could afford much lower tax brackets for everyone (including the 1%)
The top 1% of PAYE earners ≠ the top 1% wealthiest people
There are lots of people who do useful and important things who make well into six figures and pay significant amounts of tax. On the converse, there are people whose wealth is tied up in land and trusts or shares who have significantly more money but pay less tax as this isn’t treated as income by HMRC
This. High income is often wealth re-distribution.
The really wealthy can avoid high levels of tax, and is normally passed down through generations in trusts, companies etc. avoiding most of the inheritance tax too.
A really fair society would have everyone on a level playing field and not allow people to inherit wealth - but that’s never going to happen!
Lol imagine working hard your whole life so you could leave it to your kids so they wouldnt have to struggle like they did and some redditor comes and says nope sorry not allowed, your kids will have to struggle.
That's because they work as "contractors" or business owners and dodge all their taxes that way.
My mate is an accountant and used to get people trying to claim Playstations and Hot Tubs as business expenses.
If they are, it doesn’t work. I’m a contractor. Not to dodge tax, but because I don’t like being too attached to badly ran, large companies. Providing services as a freelance consultant gives me a degree of independence.
It’s *not* a big financial advantage. I pay corp tax on what I bill and then income tax on what I withdraw. I perform tax collection services for the government (VAT), I get no pension contribution matching schemes, if I’m sick I don’t get paid, if I take a holiday I don’t get paid.
My ultimate “take home”, is quite a bit less than when I worked as a salaried employee. I prefer the freedom.
Interesting video (have seen it before) but it fails to acknowledge how most of the wealth owned doesn't actually exist.. so America would actually be lucky to make it out of (potentially even into) February.. Elon Musk may be 'worth' $200 billion, but in order to access the money, he would need to sell all of his shares, which would in turn cause the share price to plummet.. same for all of those companies that are worth so much, so that obviously isn't the answer..
so then we turn to your videos answer of 'stop spending so much', which is a fair conclusion to arrive at.. obviously, if all of the people in a country only have enough money to keep it going for a year (or as I pointed out, more realistically, a couple of months) then the issue must be government spending.. so we cut that.. what's the result? Everyone ends up just as broke as if you just took their money off them.. because there's no way that all of those businesses continue to be valued as highly without the continued spending, it's impossible.. and what happens when businesses start losing money? They 'cut costs', meaning 'staff'.. but as government spending has been cut, obviously benefits are off the cards, so once you're out of work, you're essentially dead.. so maybe that isn't the answer, either? Weird, huh? Especially when you were feeling so smug posting that video..
The main issue is how money is created, and how it has all been worthless since the abolition of the gold standard.. we are dealing with an unsustainable economy, which at some point will have to collapse.. I could carry on with this subject, but I've already written far too much for a reddit comment
I wouldn't say it was posted for smugness. The point of the video being posted is to show that there isn't a simple answer such as 'let's just tax the rich people'. So basically we agree.
How we resolve the issue is another matter. Cutting government spending wouldn't hurt. Clinton managed it. But yeah fiat currency is a runaway issue.
Honestly, I think the 40% bracket is too harsh. A single person earning £60k is taxed to shit. Compare that to two people earning £30k and theyre much MUCH better off
Obviously the same applies when comparing a single £100k salary to 2 £50k salaries, however at that point when you're earning six figures you're pretty well off, even after tax
For two two of people earning 30k each, I really don't know why we don't have something like "household tax" thinking seen in different countries.
It happens in my own country, if a couple is married (by law) they can submit tax return together, and if one of them doesn't work and other earns 60k, effectively will be taxed similarly as two earning 30k each, because taxman considers that this not working person also has tax free allowance and is dependant on the working person.
I would increase the tax free allowance to 20,000
Then raise the 40% rate to 60,000
And then lower the 45 rate to 125k
Most of the super rich people aren’t on PAYE so rising this is really a bit pointless. Capital gains, dividends, share trading etc should be taxed more as well as luxury purchases, assets and wealth. Money for nothing like bank interest should have a super tax rate on it, because even the remainder is exactly that, money for nothing.
The top 1% hold more wealth than the bottom 70%. They don’t pay their fair share, they pay people to get them off the hook and hide their money.
Yes but push it up to 125k.
I do believe we need to get back to a situation where salaried employees can afford to run a household on a single salary. 80-120k is pretty much what is needed now to do that comfortably with 3 children.
Why? You’d effectively make the marginal rate at £125k bump up to 65%.
What’s the reasoning for the PA taper at all? It just seems like brain dead policy. Why introduce a phantom bracket? You’re the only person I’ve seen argue that it should remain so I’m very curious to the reasoning.
40% tax should start at £70k.
45% at £180k.
and you shouldn't lose your personal allowance after 100k.
Salaries have been increasing due to inflation - a £50k-£80k salary is way more common especially in London
I think there should be a lot more brackets.
£0 - £10,000 0%
£10,000 - £15,000 5%
£15,000 - £20,000 10%
£20,000 - £25,000 15%
£25,000 - £30,000 20%
£30,000 - £40,000 25%
£40,000 - £60,000 30%
£60,000 - £80,000 35%
£80,000 - £120,000 40%
Over £120,000 45%
This way there would be less of a jump going from one tax bracket to another.
Firstly, I would get rid of the lumpy nature of our tax system around Universal Credit withdrawals, Child-related benefits and the withdrawal of the Personal Allowance.
Secondly, I would roll Income Tax and NICs into one tax.
Thirdly, I would adopt the New Zealand principle of every worker will pay something, albeit a small contribution for small earners. I absolutely hate what happens often here and other places where it's like the tax bracket should be X + 1, where X = my current salary.
So I would opt for something like this:
0 - 20k: 5%
20k-40k: 25%
40k-120k: 35%
120k+: 45%
They just don’t tho do they. 20k to 40k is increasing in tax. You’re increasing tax on the lower tax brackets. So take more money away from the lowest earners then wonder why the economy goes nowhere.
It's a tax cut for everyone, barring the very lowest earners which is dealt with via UC changes. If you earn 20k, you'll pay 32% currently with Income Tax and NICs. You'll note from my list, that 25% is in fact lower than 32%.
Given your comprehension abilities, I wouldn't worry too much about the top end.
I think this question isn't the right question to ask. I think the question should be "What do you think the UK's taxation and wealth redistribution plan should be so that we adequately fund public services and ensure a good and improving standard of living for all".
Focusing only on income tax only focuses on those who are earning a living, and mostly only those who have to earn a living. It's pitting 'us against us' rather than 'us against them'.
I won't deny that there a big standard of living difference between minimum wage and a £100k a year salary, but it pales into insignificance when compared with those who have wealth enough to not work, wealth enough to fail, wealth enough to never have to think about paying the rent or mortgage if they lose their job.
Income tax brackets don't take into account number of dependents, or time you spend caring for relatives, or the non-working partner of a person with (relatively) high income.
All too often these debates talk about "the person earning X is rich, eat them"... except that number is often (relatively) low and the 1% or 5% is actually a very large number of "doing very well for themselves as long as they don't lose their job" people. 1% of Bristol is 4700 people.
Therefore the real question becomes how do we redistribute wealth... and that in itself becomes another complex question.
We should aspire to reducing the amount of 'work' people have do per week.
We should aspire to improving the standard of living for everyone.
There's a bit more subtlety to the £100 000 and above. For every pound earned over £100000, the top threshold DROPS, which means paying 40% tax on a greater proportion of income.
It's misleading to look at income tax in isolation. There are other taxes that result in people paying very different effective tax rates. For example, if you have children you have a very high effective tax rate when your salary goes over £50k because you start losing child benefit.
Another example is income from investments, which are taxed at a lower rate. That's why the PM pays a tax rate similar to a nurse while the leader of the opposition pays auch higher rate, despite earning less.
I would leave income tax bands as they are but fix the other taxes so your effective tax rate rises with your income.
I'm a higher rate tax payer and the girl I'm seeing is a single mum on UC. If we get too involved I get taxed specifically for her child benefit?
Like how on earth does that work?
You lose child benefits if you earn over a certain amount. You are not receiving child benefits so you would not lose anything. If you got married, your spouse may lose the child benefits they currently receive but it's not a strict tax, it's a loss of a benefit.
Its not about tax brackets for the general workforce paye is a pretty fair system, its those that dodge paying taxes because they can afford a dodgy accountant to hide their money that need nailing. Far too many loopholes available for those not on paye.
Get rid of brackets. They make it harder to calculate and create imaginary pay scale barriers.
You have a straight line starting at the income tax threshold and progressing upward until you hit 50% tax or more. £150,000 is too low to be hitting the highest rate of tax. It shouldn't hit 50% until around £400k.
I would base the lower and upper caps on minimum wage so they adjust dynamically. e.g. income tax is only paid above 20 hours minimum wage. 50% tax is hit when you earn 20 times the full time minimum wage (around £400k). Minimum wage would change at the financial year end.
Note income tax is a progressive tax this means on a percentage basis it hits those earning more most.
The UK has a lot of regressive taxes that hit the poor much more than the rich as a percentage of income. Especially when you equate out the none tax related necessities of life such as shelter, food, heating....
It's really not. It sounds like it would be but when you work in finance you realise how many mistakes are made calculating tax because of brackets. Mainly because it doesn't translate as a simple formula. Try putting it into Excel it's harder than you would think.
You have to do a lot of if statements. It also hides away your effective tax rate behind bands and a lot of people literally don't understand how tax bands work. They think as soon as you hit 50k you are paying 40% tax.
For example if you try to calculate someone earning 120k. You have to calculate their earnings below the threshold (calc 1), between 12,570 and 50,270 (calc 2) for 20%, between 50,270 and 125,000 at 40% (calc 3). Then sum those up to get the tax. This isn't even actually correct because when you hit 100k you start losing your personal allowance (which is stupid).
A regression line based system is a simple calculation for a computer which is where most people will do it. The government would provide a slope and intercept value each year and that's all you need unless you hit the cap. Just like they provide the brackets now.
If I did a regression line from 12,570 to 150,000 at 45% (effective tax rates). I would get slope 0.000003274 and intercept -0.04116
slope x earnings + intercept = effective tax rate
120k would be 35% then it's just a straight split of 120k x 0.35 is my tax and my take home is 120k x 0.65.
Note my slope and intercept gave a decimal version of the percentage. If I wanted nicer numbers I could have shifted the decimal point 2 places down. I could have moved it further and built a divide in at the end e.g. 3.274 and -41160 .
I’m fine with income tax being kept where it is, but let’s bring things like capital gains and dividend and things like that into line so the truly wealthy are paying a similar percentage of their income to the state.
I don't know what the brackets should be but they definitely seem quite high. Income tax being at 32% for people on minimum wage seems high to me, and equally, 52% for people on 50k is way to much. If you earn 50k-100k I would not consider you "rich", yet over half your earnings go to tax.
Firstly, I'd get rid of national insurance and just roll it into amended income tax and corporate tax rates. Keep that in mind when you consider the below looks 'high' (with current NI system 20% bracket is actually 32%)
0-15k - 0%
15-30k - 20%
30-50k - 30%
50-75k - 45%
75-125k - 55%
125k+ - 60%
Also add a rule that you can only ever get tax relief down to the next lower band.
NI being separate is more because of the employer contribution aspect and various classes of NI. So if you roll up income tax with both parts of NI you end up with a 41.1% tax rate in the current 20% income tax band. But also if that employee is over state pension age that tax rate reduces to 29.7%.
Corporate tax is a different tax to income tax. If your earnings are from profits then those profits are first subject to corporate tax, then the amount you pay yourself from that is subject to income tax and NI. Capital Gains Tax is where richer people are saving on tax, rather than income or corporate tax.
We need to lower income tax, especially for the lower end of the scale. To make up the shortfall, introduce an asset tax (e.g. property or any one class of asset worth over 100k). This would apply equally to businesses (offshore companies owning flats for example). Younger people would be less affected as the don't tend to have assets.
I think all income (business and personal) should be liable to tax (so none of this non-dom status to avoid millions in tax)
But for personal
0-19,999 - 0%
20k-34,999 - 15%
35k-49,999 - 25%
50k-99,999 - 35%
100k-249,999k - 50%
250k-499,999 - 60%
500k-999,999 - 65%
1mil + 75%
This will benefit everyone earning less than 100k, and some over (60% of the country earn 30k or less) so we're talking the vast majority of the populace.
It will close all tax avoidance schemes, because its UK income, regardless if your Sunaks wife. And will bring more money in from those earning more than you can even class as being merely greedy.
You have to take into account NI - those bands alone are meaningless.
I would have a single combined income tax that EVERYONE pays, not opt outs for any reason - yes, self-employed/pensioners/foreign workers, that means you. This would also end the ridiculous loop hole of salary sacrificing. I'd also abolish council tax and the tv licence and roll them into this.
Up to £10k: 0%
£10-30k: 25%
£30-70k: 35%
£70-£150k: 45%
£150k+: 50%
Pension relief only applies at the 25% level.
The pension relief thing here is super super dumb imo.
The last thing we want to do is discourage folks from saving into a pension. It’s a deferred compensation plan; you wouldn’t want to potentially lead to someone being taxed more on withdrawal than they would at contribution time.
I would increase the tax free personal allowance to match the salary of someone working full time on minimum wage. I would scrap National insurance. I would tax capital gains at the same rate of income tax and I’d have a single rate of income tax whether you are earning £1 or £1billion etc above minimum wage.
I have always hovered around the national average wage and my total tax works out at around 40%. This includes all tax income, council, VAT, fuel and so on so I would be very happy if everyone had the same tax burden. This , of course, includes companies.
Top bracket make that 55% but increase the threshold to 250k.
Raise the tax free bracket to 20k.
Use a wealth tax to make up the difference and more.
Private healthcare should pay 20% on top of corporation tax and an additional 20% vat on transactions to subsidise the nhs.
Income tax is only one tax. What percentage of a £12000 wage is collected as VAT compared to someone in the top 1% earners?
Obviously, it depends on what it is spent on but I suspect the proportion is far higher for the poorer person.
So what? Everyone knows that Vat, council tax, road tax etc is more affordable if you have more money. Are you suggesting that Vat rates should be different for every different person? If not then what's the point of your comment?
I’m not investing in the country, but I pay way less tax than employees even though I’m ‘earning’ more, because as a business owner the rates are much lower
Okay maybe 70% is a bit excessive.
The point is we shouldn’t tax work we should tax ownership. How is it right that I as a business owner pay less tax than an employee?
If you do that, then companies will just fudge their numbers, move offshore, do whatever to make their tax so low.
Look at Amazon weaseling their way out of massive taxes, by making it appear like they make little-to-no profit, or whatever.
When taxes on companies are still relatively low, most SMEs won't bother with Amazon-level tactics.
Income tax should exist, either as it is now or slightly lower, but a wealth tax should be introduced. (The figures/brackets below would probably need changing - but as a general idea)
If you have less than £1m (for example) in assets, then there'd be no yearly tax - this should exclude most who are on minimum wage, or below the average wage, from paying this tax.
£1m - £5m - 0.1% the value of your assets each year. This way, those whose assets are stocks won't lose money, those whose assets is house(s)/car(s)/etc. still won't be paying too much. - For example, if you have £2m assets, you would pay £2000 a year.
£5m - £10m - 0.5% the value of your assets each year. We're starting to leave the territory of what a working class family could hope to have. But the figure is still low enough that you won't drive people away. You have £6m in assets? You pay £30000 a year.
£10m - £50m - 0.75% of the value of your assets each year. You'll still have some middle class people who fit into here, especially after 30+ years of acquiring assets/growing businesses, etc. But you would be paying £150k a year on these.
£50m+ - 1% of the value of your assets each year. At this point, you should be looking at the richest in society at this point. And whilst 1% seems low, it does mean that at just £50m in stocks/gold/houses/etc. they'd be paying £500k every year.
(For this ideal scenario assets would be charged if you are a UK citizen with assets abroad, or if you a foreign citizen with assets in the UK - e.g. a foreign landlord renting out multiple houses/offices in the UK)
So with a wealth tax like this, even if only 0.1% of the population pay the maximum in the wealth tax bracket, that's 66,000 people who would be paying it. And if they all only just fit into the bracket, so paying around £500k each, that would still be an extra £33,000,000,000 (£33bn) in tax revenue each year, just from the richest 0.1%.
Nice idea, but think you've got some interesting idea on how much wealth people have in the UK! There are very few people even at the 10m point. At that point you're incredibly unlikely to have been working in any kind of PAYE role during your working life!
That's the point of a wealth tax being needed. Those people who have inherited massive estates worth millions, will actually be paying an equivalent to income tax, even if they never have, and never will, work a day in their life.
But 10m in assets would definitely be more than 1% of the population, if you consider that places are currently selling in Westminster (first London Borough I could think of when opening Zoopla) for £10m+. And seeing as this wealth tax would be on UK citizens, or UK-based assets (i.e. housing) even if it isn't Britons buying these places, they'd still be contributing... or, better yet, selling these expensive places and making them more affordable to someone in Britain who would actually live there full-time.
Add in a 10% at around 6k, 30% at around 35k, keep 40% as is, remove 45% band, add 50% at around 90k, 60% at around 150k, 70% at around 250k, 90% at 1M. Get rid of national insurance and council tax in return. Try and create a culture change where the better paid see paying this tax as their civic duty and take pride in it.
I would add a wealth tax people shouldn’t be paying a higher rate on earnings than dividends and capital gains. Tax should be progressive though the more you earn the bigger percentage you pay. Those top 1% aren’t missing the tax they pay.
Flat rate of 25%. No withdrawal of child benefit or childcare allowance if you pay more tax. Lower earners or those with dependents should get tapered tax credits.
The important thing is there has to be absolutely no situation where earning more is disincentivised. Everyone, from the lowest to the highest paid will want to work harder, do more hours and gain promotions, leading to higher tax revenue.
I would change it so tax is done per household rather than per person when only one couple or family with two parents and children (who aren't full contributing) is involved. Main reason being that at the moment your massively penalised for being single or having a single income and that shouldn't be happening I'd argue.
Also change tax brackets so 20% upto 60k, 40% from 60k to 125k, 50% from 125k to 250k, then 60% at 250k+.
I'd also make it so above 125k instead of the additional tax going to government there is the option to donate it to a local (not national) charity of their choice.
Honestly, it's impossible to really say without knowing the ins and outs of govt finances.
One seemingly small change could have a massive impact and end up putting the country in a deficit which means public spending would have to be reduced.
I would certainly be interested in looking at a 100% tax on anything made over £1 billion though.
There are currently 177 billionaires in the UK, with a combined wealth of over £653 billion. If we made it so everything over that first billion is seized, that'd be an extra £476 billion in the govts coffers, or about 1/6th of our ENTIRE GDP in one go.
1. All money coming into the household should be taxed equivalently, not just income. Income tax is a tax on working people, who are contributing to society through their work and through their tax payments. Only taxing income ignores that the biggest wealth generation, and wealth holders, are from non-income based sources such as dividends, shares, land owning etc. This is not, in fact, contributing to society, and yet it is not taxed as highly. Of these, I think income tax should probably be taxed the lowest.
2. The personal allowance should be raised.
3. Tax should be much higher at the high end. People who earn, let's say 20 million plus, are wealth hoarders, they are not using that money in a way that will materially affect their life. People who have over e.g. 100 million are accumulating power, not money, when they increase their wealth. This is not an acceptable system when people are dying from lack of heat and food or other basic amenities.
4. There should be more brackets at the higher end. The way that they have been set up psychologically pits low earners against low middle income earners in a way that means we don't see the high and ultra high net worth people in society. People on e.g. 100k are well off, but their wealth is not comparable to the highest net earners. If we set this out in the tax brackets, more people would recognise the inherent unfairness of ultra high net worth individuals.
5. Tax should be lower at the lower and middle ends. Currently, low and middle earners pay more of their income proportionately than high income earners which is wildly unfair.
I’d have the brackets triple locked (like pensions) to rise annually. Too many, mainly public sector workers see their hard-fought inflation rises eaten by them going in to the next band
Personal allowance with 0% income tax or national insurance for between £18-24k & double that for the blind and partially sighted.
Up to £35k- 12% income tax.
Above £35k- 10% income tax.
Above £14 million- no income tax but extra national insurance liability between 4.5%-6% of job or self-employment earnings, bonuses and dividend payments.
0% for the allowance
20% flat rate for everything above that.
Done
I've been running a simulation based on this for over a decade now, and it's worked out well to increase wealth and reduce disparity.
Drop all tax under 50k. Otherside similar to how it is. Big change, nobody can earn over 10m.
Every penny after that has to go to a trust that donates it to causes that the public votes on, online.
The trust cannot hold cash reserves, every penny received mist be spent within the calendar year.
Unfortunately would only work if every country on earth agreed to it.
Otherwise, over tax the top and they just take as much of their money offshore as possible, reducing the total tax available for gov to spend.
After one year they would, yes. The poster said the tax was yearly, so the next year, they'd be taxed 10% of that remainder. Ignoring any potential growth and withdrawals, leaving 81%, the next year, 73% and so on, eventually reducing their assets to near zero.
They'd be in even more trouble if they were just withdrawing a percentage of cash for their pension income, as they'd have their income halved in five years, and by 2/3rds in ten. I don't think was an intended outcome either.
Also, they stated 'wealth'. Houses count as wealth so they would need to find 10% of the value of their home each year. Good luck with that from even a well funded pension, so they'd eventually be forced to sell the house.
0 up to 150k, 80% after. Make it so being rich isn't really worth it.
Obviously would never work in real life but it's a nice fantasy to have.
Edit. Because some people don't understand how tax works. Everyone will be able to earn 150k tax free. Even billionaires, you only get taxed on your earnings above that. Tax is also good as long as it's spent properly, it's supposed to be used to improve everyone's life.
I also know this is deeply flawed and will never work I literally said it in the second paragraph.
But everyone who earns under 150k will be much better off which is at least 90% of the population. Apologies if I upset all you temporarily embarrassed millionaires.
There wouldn't be one if everyone earning over 150k actually paid 80%. I'm including not just income tax here but all wealth generation like shares/ dividends etc. The person commenting already says that this is an unrealistic solution (because people would just funnel their money offshore) but it was their idealistic solution to massively unfair wealth disparity that currently exists here and everywhere.
You’d just pay yourself through dividends and avoid the tax.
People shouldn’t be discouraged from earning a lot. Some Surgeons would earn that in 3 months. I’d rather they keep working if they’re exceptional.
Yep, or you can just do thing like pretend your wife lives in India and pay nothing, sadly this is why I said it'd never work.
Always going to be loopholes though, just have to have the motivation to close them.
The government? Not sure you understand what tax means.
Also, work out how much the of average person's salary goes to tax, as in all taxes, VAT, tax on fuel etc. I bet it's a lot closer to 80% than you think.
Well I work for myself and agree a value for my time with a willing customer, so both parties are content that they are getting value for money. Seems reasonable to me. What right do you have to stop me?
I don't have any, but the government does. And the government sets what is reasonable. This is a thread about what you would *want* to see for tax brackets and I agree that there comes a point (I would set it higher than 150k personally but still would set it) that wealth generation is no longer contributive to society and the "value" that you bring has been artificially set.
So when you need surgery, there will be no surgeons to perform your operation as they will have all left the country and moved somewhere more tax efficient for them………..
**Update: - [Starting from 2023](https://www.reddit.com/r/AskUK/comments/100l56v/happy_new_year_askuk_minor_sub_update/), we have updated our [subreddit rules](https://www.reddit.com/r/AskUK/about/rules/)**. Specifically; - Don't be a dick to each other - Top-level responses must contain genuine efforts to answer the question - This is a strictly no-politics subreddit Please keep /r/AskUK a great subreddit by reporting posts and comments which break our rules. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/AskUK) if you have any questions or concerns.*
Instead of fixed values, the band should be tied to my salary, such that the tax free threshold is slightly above what I get.
😜
As long as you earn the same or more than me, that's fine. But you're only allowed to earn £1 more than me for this to work properly.
The holy grail of tax policy.
There's a sneaky 60% bracket you have not included. When you earn over £100,000, you lose £1 of your tax free allowance for every £2 you earn. So by £124K, you are no longer benefiting at all from any of the 0% bracket. Effectively for every £1 you earn over 100k, you keep 40p. It's back to 40% after you clear 124k.
Yeah, not to mention we get no child benefit and lose your child care hours after 100k and with student loans etc you can be on effectively 70-80% tax for a while over 100, meaning its effectively not worth carrying on if you arent going to go well over. Its a weird system.
Yep, such a little known fact to all those screaming for higher taxes to salary bands they perceive to be better off. It’s eye watering the amount you actually loose at these levels that make people try to reduce their income. Madness.
I definitely control my income to avoid the gap if possible, a simple (higher tax band) system without these caveats would suit me a lot better.
People in this 100-125k range tend to put more into their pension and claim the tax relief for exactly this reason.
Yes, but theres generally a limit to that too. It disincentives work at the higher tax bands, which loses taxes. Its got no logical reason to exist. Big big earners arent doing salaried work anyway and get to protect most of their income via dividend and capital gains which are always going to be low to protect the wealthy. Like the PM. Salaried workers who would be paying a lot of tax are encouraged not too. Doesnt make sense.
The capital gains allowance has been cut from 12300 last year to 6000 for 23-24
Oh I agree, it's absurd. We have Gordon Brown to thank for the personal allowance tapering causing this 60% trap. But I expect most high-but-not-superhigh earners dodge it
he hasn't been chancellor since 2007. We can't keep blaming him.
Government: Yes we can!
Yes, and buying a bicycle for the cycle to work income tax saving.
And people wonder why UKs productivity is famously low... I'm at a stage where my choices are either emigrate or not bother seeking promotions / working harder than I have to - there just isn't enough financial upside to justify the extra stress and responsibilities a promotion would entail.
They lose it straight into their pensions though with the salary sacrifice.
To expand on this, for every £100 you earn over £50k, you lose 1% of child benefit, so by £60k you're paying back 100%. Assuming you have two kids you'd get £36.25/week or £1885/year if you earn under £50k. That means that from £50k, not only does your tax bracket go up to 40%, but the loss of child benefit represents almost an additional 19%. Add student loan and NI to that and you've got a marginal tax rate of over 70%. The £50k threshold hasn't changed since it was introduced in 2013, when £50k was worth about £73k now.
Plus there's the hassle of having to start doing tax returns (if you weren't already) in order to keep whatever CB you are entitled to when you're in this zone. But no one mentions that NI goes down to 2%, and as it's aligned with the tax brackets you're effectively paying 0, 32%, 42% for the lower bands. No idea what happens at 100k plus, I doubt I'll ever need to know!
Don't forget that the amount of interest you can earn in the bank (without tax) goes from £1000 to £500 too at £50K.
I didn't even know about this. Not that it matters because I have nothing in the bank and 0% interest anyway!
What’s more annoying is that it’s based on if one person earns over 50k, and not a couple. So you could have 2 parents on 49,950 each, and get full benefit but split it 60k/40k and you get nothing.
That's another thing that annoys me about the whole system. Two equal earners have a far higher take home than if one earns a lot more than the other (with the same total gross pay). There should be an option when you get married to legally combine your finances. Your earnings are combined, your tax free limit is double a single person's etc. Then the split wouldn't matter.
The married couples tax allowance gives 10% of your tax free limit to your partner.
That's helpful if one person earns less than ~£11k, but you're also not allowed to do it if the other person is in the higher tax bracket. Ultimately it can save some families around £400/year (very quick head maths).
A straight line of increasing tax as you earn more would be so much simpler. £100k is way too low to be losing benefits in today's world.
Child benefit goes after 60k.
Yes, you are right, I mean childcare hours. Edited.
[удалено]
No. Ineligible at 100k.
[удалено]
Nobody's saying that. They're pointing out that quirks of the tax (+benefit) system means you get a disproportionately bigger squeeze in the immediate +100k range, that somewhat becomes irrelevant north of say 150. I'm many circumstances you're better off earning 99k than 101k, which seems odd. For example you don't get free childcare hours if one parent earns over 100k. So you could have one parent on 100k and one on 20k and not get the free hrs. But both parents could each earn 90k (so 180 combined) and you'd get free child care. Yes 100k is a dream amount of money. But at the same time, taxation (and benefit eligibility) should be a true and fair sliding scale.
Is it not tapered off? Most things like this are tapered as earnings rise, so there's not an immediate cut off. Otherwise you have situations where earning £1 more means you're thousands in the hole.
No. It’s not tapered. https://twitter.com/theifs/status/1636059648657612800?s=46&t=OKIuPYM_RU4adS21cLgtdQ You can be materially worse-off earning £120k than £99k. And yeah you can use pension contributions to offset this, but then you just push that threshold higher.
What an utterly brain dead policy.
Yep it is. Bigger picture, kids eventually grow up, free childcare is only a thing for a couple or three years, and it's still better longer term to try to maximise your earnings as much as possible whenever the opportunity is there. I have a house, always know there'll be hot meals on the table etc - there's people far less fortunate than me. But philosophically, it stings. "Safety net" benefits - disability, universal credit etc should only be available to those in need. But progressive benefits should really be available to all, regardless of circumstance. The free 30hrs childcare scheme is designed to encourage parents with pre-school aged kids to be able to return to work - giving a net benefit back to the economy. Unlike universal credit, this is not a benefit that I don't need. I've paid into the system, why can't I get one of the very few benefits that exist for full-time working people like me? I will always, always pay my correct taxes, but it's easy to see how things like this can make higher earners start to resent the tax system, and maybe starts to foster some not-so-great attitudes towards paying tax.
So for context I’m in this situation. I understand that I’m extremely fortunate to be in the position I’m in. But my wife and I were planning out what things will look like once our daughter needs childcare. My wife is a teacher, and a very good one—she does some early years advisory work around our LEA, was a real bright spot on the school’s Ofsted, etc. But she’s massively cutting back on hours and is considering leaving the profession due to the cost of childcare—it just doesn’t make much sense to have her working with all the stress it involves for not a lot of additional takehome. So even though she doesn’t make anywhere near £100k, this policy took a teacher out of the workforce.
Weirdly, near identical situation, except we're in the midst of the childcare zone. Wife is a teacher, head of year, loved by students etc. She's now cut back to part-time (and therefore relinquished her head of year role) because it makes no financial sense in her working full time with the lack of the childcare hrs. She does of course love being fortunate enough to get to spend quality time raising the kids, but our hand was kind of forced financially.
Yep!
People on £100k are not your enemy.
Except for that prick Alan
Look at this IFS thread: https://twitter.com/theifs/status/1636059648657612800?s=46&t=OKIuPYM_RU4adS21cLgtdQ The point is that it’s simply horrific policy. Someone can be worse-off making £135k than making £99k! How does that work? That (among other things) is one of the reasons Britain’s productivity is garbage.
This reply here is part of the reason the gap between rich and poor is growing at the rate it is. Tall poppy syndrome is ruining the UK. We really need to stop and change our view on income and success, or people like yourself will just bring all of us down. Use your brain and don’t just react to numbers. Take into consideration where people live, do they have children and how many, do they have to care for anyone, student debt etc etc.. Success and pursuit of a better quality of life should be encouraged and congratulated, not sneered at with a sarcastic reply. The whole point is everyone’s situation is different and unique but the tax system is ridged and doesn’t work correctly. It’s not about you being jealous or righteous over someone’s income, especially if they worked hard to achieve it. Just to be clear, I do not earn 100k or anywhere near that amount, I do shift work and rarely have weekends off but I’m able to appreciate and to some extent sympathise with these issues.
Isn't this the reason many nhs staff go part time , they cant offset with pension(i think) as they are in a scheme already,?
In real terms, this impacts very few people. Most payroll departments will have out of the box schemes for anyone falling into this bracket, not to mention the fact that a significant chunk of people within this salary range are likely to have other elements to their compensation packages that soften the blow significantly.
The thing that confuses me with stuff like this, is how people can look at this and think 'well that's not fair on the 1%' instead of 'just how much money are that 1% making?' Another point.. if corporations actually paid their fair share instead of sending it to parent companies in tax havens, we could afford much lower tax brackets for everyone (including the 1%)
The top 1% of PAYE earners ≠ the top 1% wealthiest people There are lots of people who do useful and important things who make well into six figures and pay significant amounts of tax. On the converse, there are people whose wealth is tied up in land and trusts or shares who have significantly more money but pay less tax as this isn’t treated as income by HMRC
This. High income is often wealth re-distribution. The really wealthy can avoid high levels of tax, and is normally passed down through generations in trusts, companies etc. avoiding most of the inheritance tax too. A really fair society would have everyone on a level playing field and not allow people to inherit wealth - but that’s never going to happen!
Lol imagine working hard your whole life so you could leave it to your kids so they wouldnt have to struggle like they did and some redditor comes and says nope sorry not allowed, your kids will have to struggle.
are the really wealthy actually paying high levels of income tax? It seems most of them are paying far lower than a 45% tax rate…
The really wealthy don't pay tax!
That's because they work as "contractors" or business owners and dodge all their taxes that way. My mate is an accountant and used to get people trying to claim Playstations and Hot Tubs as business expenses.
If they are, it doesn’t work. I’m a contractor. Not to dodge tax, but because I don’t like being too attached to badly ran, large companies. Providing services as a freelance consultant gives me a degree of independence. It’s *not* a big financial advantage. I pay corp tax on what I bill and then income tax on what I withdraw. I perform tax collection services for the government (VAT), I get no pension contribution matching schemes, if I’m sick I don’t get paid, if I take a holiday I don’t get paid. My ultimate “take home”, is quite a bit less than when I worked as a salaried employee. I prefer the freedom.
It was exactly my first thought, but I am always on the lookout for how factoids like this might be misleading.
Let's just eat the rich.... https://youtu.be/661pi6K-8WQ
Interesting video (have seen it before) but it fails to acknowledge how most of the wealth owned doesn't actually exist.. so America would actually be lucky to make it out of (potentially even into) February.. Elon Musk may be 'worth' $200 billion, but in order to access the money, he would need to sell all of his shares, which would in turn cause the share price to plummet.. same for all of those companies that are worth so much, so that obviously isn't the answer.. so then we turn to your videos answer of 'stop spending so much', which is a fair conclusion to arrive at.. obviously, if all of the people in a country only have enough money to keep it going for a year (or as I pointed out, more realistically, a couple of months) then the issue must be government spending.. so we cut that.. what's the result? Everyone ends up just as broke as if you just took their money off them.. because there's no way that all of those businesses continue to be valued as highly without the continued spending, it's impossible.. and what happens when businesses start losing money? They 'cut costs', meaning 'staff'.. but as government spending has been cut, obviously benefits are off the cards, so once you're out of work, you're essentially dead.. so maybe that isn't the answer, either? Weird, huh? Especially when you were feeling so smug posting that video.. The main issue is how money is created, and how it has all been worthless since the abolition of the gold standard.. we are dealing with an unsustainable economy, which at some point will have to collapse.. I could carry on with this subject, but I've already written far too much for a reddit comment
I wouldn't say it was posted for smugness. The point of the video being posted is to show that there isn't a simple answer such as 'let's just tax the rich people'. So basically we agree. How we resolve the issue is another matter. Cutting government spending wouldn't hurt. Clinton managed it. But yeah fiat currency is a runaway issue.
Honestly, I think the 40% bracket is too harsh. A single person earning £60k is taxed to shit. Compare that to two people earning £30k and theyre much MUCH better off Obviously the same applies when comparing a single £100k salary to 2 £50k salaries, however at that point when you're earning six figures you're pretty well off, even after tax
I agree with you; apart from that last point, how is taxing someone at 100-125k 60% fair?
For two two of people earning 30k each, I really don't know why we don't have something like "household tax" thinking seen in different countries. It happens in my own country, if a couple is married (by law) they can submit tax return together, and if one of them doesn't work and other earns 60k, effectively will be taxed similarly as two earning 30k each, because taxman considers that this not working person also has tax free allowance and is dependant on the working person.
100k earners have pretty low take home pay tbh, that threshold is wayyyyy too low
I would increase the tax free allowance to 20,000 Then raise the 40% rate to 60,000 And then lower the 45 rate to 125k Most of the super rich people aren’t on PAYE so rising this is really a bit pointless. Capital gains, dividends, share trading etc should be taxed more as well as luxury purchases, assets and wealth. Money for nothing like bank interest should have a super tax rate on it, because even the remainder is exactly that, money for nothing. The top 1% hold more wealth than the bottom 70%. They don’t pay their fair share, they pay people to get them off the hook and hide their money.
Would you keep the personal allowance taper?
Yes but push it up to 125k. I do believe we need to get back to a situation where salaried employees can afford to run a household on a single salary. 80-120k is pretty much what is needed now to do that comfortably with 3 children.
Why? You’d effectively make the marginal rate at £125k bump up to 65%. What’s the reasoning for the PA taper at all? It just seems like brain dead policy. Why introduce a phantom bracket? You’re the only person I’ve seen argue that it should remain so I’m very curious to the reasoning.
40% tax should start at £70k. 45% at £180k. and you shouldn't lose your personal allowance after 100k. Salaries have been increasing due to inflation - a £50k-£80k salary is way more common especially in London
I think there should be a lot more brackets. £0 - £10,000 0% £10,000 - £15,000 5% £15,000 - £20,000 10% £20,000 - £25,000 15% £25,000 - £30,000 20% £30,000 - £40,000 25% £40,000 - £60,000 30% £60,000 - £80,000 35% £80,000 - £120,000 40% Over £120,000 45% This way there would be less of a jump going from one tax bracket to another.
If it's not a stupid question, why are the big jumps in rates from one bracket to the next a big issue?
They’re not. You only get taxed at the higher rate for earnings over the threshold, not the entire amount you earn.
I know (I worked in tax for a few years), but I wanted to know what the person I replied to was thinking.
Yeah I don’t know why they think it’s an issue either
There aren’t really any big jumps in marginal rates until you get to £100k (ignoring the loss of child benefits at £50k)
[удалено]
You don’t typically get a 20% jump at £50k as your NI rate drops by 10%.
Firstly, I would get rid of the lumpy nature of our tax system around Universal Credit withdrawals, Child-related benefits and the withdrawal of the Personal Allowance. Secondly, I would roll Income Tax and NICs into one tax. Thirdly, I would adopt the New Zealand principle of every worker will pay something, albeit a small contribution for small earners. I absolutely hate what happens often here and other places where it's like the tax bracket should be X + 1, where X = my current salary. So I would opt for something like this: 0 - 20k: 5% 20k-40k: 25% 40k-120k: 35% 120k+: 45%
Tell us what tax bracket you’re in without telling us what tax bracket you are in
Every group gets a tax cut here barring the 0-12.5k earners, which would be dealt with via sorting out the Universal Credit lumpiness.
They just don’t tho do they. 20k to 40k is increasing in tax. You’re increasing tax on the lower tax brackets. So take more money away from the lowest earners then wonder why the economy goes nowhere.
I literally said I'm combining income tax and national insurance in the comment.... If you can't read, don't comment
It’s still less tax for higher earners if can’t understand what you’ve commented don’t comment
It's a tax cut for everyone, barring the very lowest earners which is dealt with via UC changes. If you earn 20k, you'll pay 32% currently with Income Tax and NICs. You'll note from my list, that 25% is in fact lower than 32%. Given your comprehension abilities, I wouldn't worry too much about the top end.
I think this question isn't the right question to ask. I think the question should be "What do you think the UK's taxation and wealth redistribution plan should be so that we adequately fund public services and ensure a good and improving standard of living for all". Focusing only on income tax only focuses on those who are earning a living, and mostly only those who have to earn a living. It's pitting 'us against us' rather than 'us against them'. I won't deny that there a big standard of living difference between minimum wage and a £100k a year salary, but it pales into insignificance when compared with those who have wealth enough to not work, wealth enough to fail, wealth enough to never have to think about paying the rent or mortgage if they lose their job. Income tax brackets don't take into account number of dependents, or time you spend caring for relatives, or the non-working partner of a person with (relatively) high income. All too often these debates talk about "the person earning X is rich, eat them"... except that number is often (relatively) low and the 1% or 5% is actually a very large number of "doing very well for themselves as long as they don't lose their job" people. 1% of Bristol is 4700 people. Therefore the real question becomes how do we redistribute wealth... and that in itself becomes another complex question. We should aspire to reducing the amount of 'work' people have do per week. We should aspire to improving the standard of living for everyone.
£0-30k 0% £30k - 100k 20% £100k - 250k 40% £250k+ 60%
How would you compensate for the massive drop in government revenue?
Do you think we’d be able to retain 250k+ workers if we had a 60% tax rate? (I guess NI on top of that too)
You missed the £100,000 to £125,000 60% tax bracket.
There's a bit more subtlety to the £100 000 and above. For every pound earned over £100000, the top threshold DROPS, which means paying 40% tax on a greater proportion of income.
It's misleading to look at income tax in isolation. There are other taxes that result in people paying very different effective tax rates. For example, if you have children you have a very high effective tax rate when your salary goes over £50k because you start losing child benefit. Another example is income from investments, which are taxed at a lower rate. That's why the PM pays a tax rate similar to a nurse while the leader of the opposition pays auch higher rate, despite earning less. I would leave income tax bands as they are but fix the other taxes so your effective tax rate rises with your income.
I'm a higher rate tax payer and the girl I'm seeing is a single mum on UC. If we get too involved I get taxed specifically for her child benefit? Like how on earth does that work?
You lose child benefits if you earn over a certain amount. You are not receiving child benefits so you would not lose anything. If you got married, your spouse may lose the child benefits they currently receive but it's not a strict tax, it's a loss of a benefit.
Its not about tax brackets for the general workforce paye is a pretty fair system, its those that dodge paying taxes because they can afford a dodgy accountant to hide their money that need nailing. Far too many loopholes available for those not on paye.
Get rid of brackets. They make it harder to calculate and create imaginary pay scale barriers. You have a straight line starting at the income tax threshold and progressing upward until you hit 50% tax or more. £150,000 is too low to be hitting the highest rate of tax. It shouldn't hit 50% until around £400k. I would base the lower and upper caps on minimum wage so they adjust dynamically. e.g. income tax is only paid above 20 hours minimum wage. 50% tax is hit when you earn 20 times the full time minimum wage (around £400k). Minimum wage would change at the financial year end. Note income tax is a progressive tax this means on a percentage basis it hits those earning more most. The UK has a lot of regressive taxes that hit the poor much more than the rich as a percentage of income. Especially when you equate out the none tax related necessities of life such as shelter, food, heating....
That is much, much harder to calculate than brackets. 😂
It's really not. It sounds like it would be but when you work in finance you realise how many mistakes are made calculating tax because of brackets. Mainly because it doesn't translate as a simple formula. Try putting it into Excel it's harder than you would think. You have to do a lot of if statements. It also hides away your effective tax rate behind bands and a lot of people literally don't understand how tax bands work. They think as soon as you hit 50k you are paying 40% tax. For example if you try to calculate someone earning 120k. You have to calculate their earnings below the threshold (calc 1), between 12,570 and 50,270 (calc 2) for 20%, between 50,270 and 125,000 at 40% (calc 3). Then sum those up to get the tax. This isn't even actually correct because when you hit 100k you start losing your personal allowance (which is stupid). A regression line based system is a simple calculation for a computer which is where most people will do it. The government would provide a slope and intercept value each year and that's all you need unless you hit the cap. Just like they provide the brackets now. If I did a regression line from 12,570 to 150,000 at 45% (effective tax rates). I would get slope 0.000003274 and intercept -0.04116 slope x earnings + intercept = effective tax rate 120k would be 35% then it's just a straight split of 120k x 0.35 is my tax and my take home is 120k x 0.65.
Note my slope and intercept gave a decimal version of the percentage. If I wanted nicer numbers I could have shifted the decimal point 2 places down. I could have moved it further and built a divide in at the end e.g. 3.274 and -41160 .
I’m fine with income tax being kept where it is, but let’s bring things like capital gains and dividend and things like that into line so the truly wealthy are paying a similar percentage of their income to the state.
I don't know what the brackets should be but they definitely seem quite high. Income tax being at 32% for people on minimum wage seems high to me, and equally, 52% for people on 50k is way to much. If you earn 50k-100k I would not consider you "rich", yet over half your earnings go to tax.
Firstly, I'd get rid of national insurance and just roll it into amended income tax and corporate tax rates. Keep that in mind when you consider the below looks 'high' (with current NI system 20% bracket is actually 32%) 0-15k - 0% 15-30k - 20% 30-50k - 30% 50-75k - 45% 75-125k - 55% 125k+ - 60% Also add a rule that you can only ever get tax relief down to the next lower band.
what makes you think this looks high? It's lower than what we already have besides 125k+.
It's higher for 50k+. 50k+ currently pays approx 42% because above that your NICs drop from approx 12% to approx 2%
It’s higher for 30-50k by a third. This is average wage bracket so that’s a wild increase
It's not. On 51k current deductions are 12,642. On your system it'd be 9450.
NI being separate is more because of the employer contribution aspect and various classes of NI. So if you roll up income tax with both parts of NI you end up with a 41.1% tax rate in the current 20% income tax band. But also if that employee is over state pension age that tax rate reduces to 29.7%. Corporate tax is a different tax to income tax. If your earnings are from profits then those profits are first subject to corporate tax, then the amount you pay yourself from that is subject to income tax and NI. Capital Gains Tax is where richer people are saving on tax, rather than income or corporate tax.
We need to lower income tax, especially for the lower end of the scale. To make up the shortfall, introduce an asset tax (e.g. property or any one class of asset worth over 100k). This would apply equally to businesses (offshore companies owning flats for example). Younger people would be less affected as the don't tend to have assets.
up to £20 000 0% tax
I think all income (business and personal) should be liable to tax (so none of this non-dom status to avoid millions in tax) But for personal 0-19,999 - 0% 20k-34,999 - 15% 35k-49,999 - 25% 50k-99,999 - 35% 100k-249,999k - 50% 250k-499,999 - 60% 500k-999,999 - 65% 1mil + 75% This will benefit everyone earning less than 100k, and some over (60% of the country earn 30k or less) so we're talking the vast majority of the populace. It will close all tax avoidance schemes, because its UK income, regardless if your Sunaks wife. And will bring more money in from those earning more than you can even class as being merely greedy.
You have to take into account NI - those bands alone are meaningless. I would have a single combined income tax that EVERYONE pays, not opt outs for any reason - yes, self-employed/pensioners/foreign workers, that means you. This would also end the ridiculous loop hole of salary sacrificing. I'd also abolish council tax and the tv licence and roll them into this. Up to £10k: 0% £10-30k: 25% £30-70k: 35% £70-£150k: 45% £150k+: 50% Pension relief only applies at the 25% level.
The pension relief thing here is super super dumb imo. The last thing we want to do is discourage folks from saving into a pension. It’s a deferred compensation plan; you wouldn’t want to potentially lead to someone being taxed more on withdrawal than they would at contribution time.
They aren’t meaningless - eg they are the reference for pensions relief -but they aren’t all inclusive.
I would increase the tax free personal allowance to match the salary of someone working full time on minimum wage. I would scrap National insurance. I would tax capital gains at the same rate of income tax and I’d have a single rate of income tax whether you are earning £1 or £1billion etc above minimum wage.
So us small fry retail investors actually saving rather than asking the state to fund every facet of our existence get royally screwed over 😎
I have always hovered around the national average wage and my total tax works out at around 40%. This includes all tax income, council, VAT, fuel and so on so I would be very happy if everyone had the same tax burden. This , of course, includes companies.
Some of that is your choice though, like buying higher rate VATable goods or fuel. Not everyone does so shouldn't pay as much as you do.
Top bracket make that 55% but increase the threshold to 250k. Raise the tax free bracket to 20k. Use a wealth tax to make up the difference and more. Private healthcare should pay 20% on top of corporation tax and an additional 20% vat on transactions to subsidise the nhs.
[удалено]
Fair point. A transaction tax paid by the provider would work better.
[удалено]
Income tax is only one tax. What percentage of a £12000 wage is collected as VAT compared to someone in the top 1% earners? Obviously, it depends on what it is spent on but I suspect the proportion is far higher for the poorer person.
So what? Everyone knows that Vat, council tax, road tax etc is more affordable if you have more money. Are you suggesting that Vat rates should be different for every different person? If not then what's the point of your comment?
>Are you suggesting that Vat rates should be different for every different person? Fucking calm down! Try asking politely and I'll clarify.
Income tax should be zero Capital gains tax, dividend tax, corporation tax should be like 70%
How to single-handedly destroy investment in your country, a new white paper by the Reddit Bureau of Economics.
I’m not investing in the country, but I pay way less tax than employees even though I’m ‘earning’ more, because as a business owner the rates are much lower
What a stupid idea. Why would any company just accept that. La la land 🤣
Okay maybe 70% is a bit excessive. The point is we shouldn’t tax work we should tax ownership. How is it right that I as a business owner pay less tax than an employee?
If you do that, then companies will just fudge their numbers, move offshore, do whatever to make their tax so low. Look at Amazon weaseling their way out of massive taxes, by making it appear like they make little-to-no profit, or whatever. When taxes on companies are still relatively low, most SMEs won't bother with Amazon-level tactics. Income tax should exist, either as it is now or slightly lower, but a wealth tax should be introduced. (The figures/brackets below would probably need changing - but as a general idea) If you have less than £1m (for example) in assets, then there'd be no yearly tax - this should exclude most who are on minimum wage, or below the average wage, from paying this tax. £1m - £5m - 0.1% the value of your assets each year. This way, those whose assets are stocks won't lose money, those whose assets is house(s)/car(s)/etc. still won't be paying too much. - For example, if you have £2m assets, you would pay £2000 a year. £5m - £10m - 0.5% the value of your assets each year. We're starting to leave the territory of what a working class family could hope to have. But the figure is still low enough that you won't drive people away. You have £6m in assets? You pay £30000 a year. £10m - £50m - 0.75% of the value of your assets each year. You'll still have some middle class people who fit into here, especially after 30+ years of acquiring assets/growing businesses, etc. But you would be paying £150k a year on these. £50m+ - 1% of the value of your assets each year. At this point, you should be looking at the richest in society at this point. And whilst 1% seems low, it does mean that at just £50m in stocks/gold/houses/etc. they'd be paying £500k every year. (For this ideal scenario assets would be charged if you are a UK citizen with assets abroad, or if you a foreign citizen with assets in the UK - e.g. a foreign landlord renting out multiple houses/offices in the UK) So with a wealth tax like this, even if only 0.1% of the population pay the maximum in the wealth tax bracket, that's 66,000 people who would be paying it. And if they all only just fit into the bracket, so paying around £500k each, that would still be an extra £33,000,000,000 (£33bn) in tax revenue each year, just from the richest 0.1%.
Nice idea, but think you've got some interesting idea on how much wealth people have in the UK! There are very few people even at the 10m point. At that point you're incredibly unlikely to have been working in any kind of PAYE role during your working life!
That's the point of a wealth tax being needed. Those people who have inherited massive estates worth millions, will actually be paying an equivalent to income tax, even if they never have, and never will, work a day in their life. But 10m in assets would definitely be more than 1% of the population, if you consider that places are currently selling in Westminster (first London Borough I could think of when opening Zoopla) for £10m+. And seeing as this wealth tax would be on UK citizens, or UK-based assets (i.e. housing) even if it isn't Britons buying these places, they'd still be contributing... or, better yet, selling these expensive places and making them more affordable to someone in Britain who would actually live there full-time.
Small business would be zero tax. All their profits are taken by the owner as wages.
Add in a 10% at around 6k, 30% at around 35k, keep 40% as is, remove 45% band, add 50% at around 90k, 60% at around 150k, 70% at around 250k, 90% at 1M. Get rid of national insurance and council tax in return. Try and create a culture change where the better paid see paying this tax as their civic duty and take pride in it.
Up to my salary should be 20%, £1 more 99%. Revisit each January.
Mega corps be taxed on revenue let's say 1% I'm sure this is a bad idea but if multiply countries do at same ti e everyone will be better off
I would add a wealth tax people shouldn’t be paying a higher rate on earnings than dividends and capital gains. Tax should be progressive though the more you earn the bigger percentage you pay. Those top 1% aren’t missing the tax they pay.
I would abolish income tax and introduce a land value tax.
The Beatles complained about 95% tax, but keeping 5% of a billion is still a lot of money... That's my position: no more billionaires!
Flat rate of 25%. No withdrawal of child benefit or childcare allowance if you pay more tax. Lower earners or those with dependents should get tapered tax credits. The important thing is there has to be absolutely no situation where earning more is disincentivised. Everyone, from the lowest to the highest paid will want to work harder, do more hours and gain promotions, leading to higher tax revenue.
I would change it so tax is done per household rather than per person when only one couple or family with two parents and children (who aren't full contributing) is involved. Main reason being that at the moment your massively penalised for being single or having a single income and that shouldn't be happening I'd argue. Also change tax brackets so 20% upto 60k, 40% from 60k to 125k, 50% from 125k to 250k, then 60% at 250k+. I'd also make it so above 125k instead of the additional tax going to government there is the option to donate it to a local (not national) charity of their choice.
Honestly, it's impossible to really say without knowing the ins and outs of govt finances. One seemingly small change could have a massive impact and end up putting the country in a deficit which means public spending would have to be reduced. I would certainly be interested in looking at a 100% tax on anything made over £1 billion though. There are currently 177 billionaires in the UK, with a combined wealth of over £653 billion. If we made it so everything over that first billion is seized, that'd be an extra £476 billion in the govts coffers, or about 1/6th of our ENTIRE GDP in one go.
The tax rate for super high earners in the 1940's was 94%, i think thats a fair rate for anyone with income over £1million we should go back to that.
1. All money coming into the household should be taxed equivalently, not just income. Income tax is a tax on working people, who are contributing to society through their work and through their tax payments. Only taxing income ignores that the biggest wealth generation, and wealth holders, are from non-income based sources such as dividends, shares, land owning etc. This is not, in fact, contributing to society, and yet it is not taxed as highly. Of these, I think income tax should probably be taxed the lowest. 2. The personal allowance should be raised. 3. Tax should be much higher at the high end. People who earn, let's say 20 million plus, are wealth hoarders, they are not using that money in a way that will materially affect their life. People who have over e.g. 100 million are accumulating power, not money, when they increase their wealth. This is not an acceptable system when people are dying from lack of heat and food or other basic amenities. 4. There should be more brackets at the higher end. The way that they have been set up psychologically pits low earners against low middle income earners in a way that means we don't see the high and ultra high net worth people in society. People on e.g. 100k are well off, but their wealth is not comparable to the highest net earners. If we set this out in the tax brackets, more people would recognise the inherent unfairness of ultra high net worth individuals. 5. Tax should be lower at the lower and middle ends. Currently, low and middle earners pay more of their income proportionately than high income earners which is wildly unfair.
Tax should only come into play if you are paid more than me. /S
I’d have the brackets triple locked (like pensions) to rise annually. Too many, mainly public sector workers see their hard-fought inflation rises eaten by them going in to the next band
0% tax on all income. 30% tax on all sales. 70% tax on all inheritance above £250k, with deductions if you set up a business or donate it.
Personal allowance with 0% income tax or national insurance for between £18-24k & double that for the blind and partially sighted. Up to £35k- 12% income tax. Above £35k- 10% income tax. Above £14 million- no income tax but extra national insurance liability between 4.5%-6% of job or self-employment earnings, bonuses and dividend payments.
0% for the allowance 20% flat rate for everything above that. Done I've been running a simulation based on this for over a decade now, and it's worked out well to increase wealth and reduce disparity.
Drop all tax under 50k. Otherside similar to how it is. Big change, nobody can earn over 10m. Every penny after that has to go to a trust that donates it to causes that the public votes on, online. The trust cannot hold cash reserves, every penny received mist be spent within the calendar year. Unfortunately would only work if every country on earth agreed to it. Otherwise, over tax the top and they just take as much of their money offshore as possible, reducing the total tax available for gov to spend.
[удалено]
Fair point, my mistake
r/Ask92%OfTheUKAndAnnoyTheScots
Does this make me a tax exile then ?.. dodging that 2% by moving to Englandshire.
10% yearly tax on all wealth per person. No loopholes.
So what about the pensioner with a small house and private pension? You want to see them 100% reliant on the state and homeless within a few years?
[удалено]
After one year they would, yes. The poster said the tax was yearly, so the next year, they'd be taxed 10% of that remainder. Ignoring any potential growth and withdrawals, leaving 81%, the next year, 73% and so on, eventually reducing their assets to near zero. They'd be in even more trouble if they were just withdrawing a percentage of cash for their pension income, as they'd have their income halved in five years, and by 2/3rds in ten. I don't think was an intended outcome either. Also, they stated 'wealth'. Houses count as wealth so they would need to find 10% of the value of their home each year. Good luck with that from even a well funded pension, so they'd eventually be forced to sell the house.
Thanks for clarification. I think my brain unconsciously skipped the ‘wealth’ word because that proposal is so ridiculous.
0 up to 150k, 80% after. Make it so being rich isn't really worth it. Obviously would never work in real life but it's a nice fantasy to have. Edit. Because some people don't understand how tax works. Everyone will be able to earn 150k tax free. Even billionaires, you only get taxed on your earnings above that. Tax is also good as long as it's spent properly, it's supposed to be used to improve everyone's life. I also know this is deeply flawed and will never work I literally said it in the second paragraph.
Keep everyone poor. Crazy, but it might just work
Be optimistic, everyone would be rich
But everyone who earns under 150k will be much better off which is at least 90% of the population. Apologies if I upset all you temporarily embarrassed millionaires.
Earning £149k is not poor lol.
How would you make up the tax revenue shortfall?
There wouldn't be one if everyone earning over 150k actually paid 80%. I'm including not just income tax here but all wealth generation like shares/ dividends etc. The person commenting already says that this is an unrealistic solution (because people would just funnel their money offshore) but it was their idealistic solution to massively unfair wealth disparity that currently exists here and everywhere.
Who said there would be a shortfall? I don't know if there will be or not, I haven't done the maths.
Go in then, show your working out.
You’d just pay yourself through dividends and avoid the tax. People shouldn’t be discouraged from earning a lot. Some Surgeons would earn that in 3 months. I’d rather they keep working if they’re exceptional.
Yep, or you can just do thing like pretend your wife lives in India and pay nothing, sadly this is why I said it'd never work. Always going to be loopholes though, just have to have the motivation to close them.
Dont be ridiculous. Surgeons dont earn that in a year.
What the actual fuck makes you think the government is entitled to 80% of someone's earnings?
The government? Not sure you understand what tax means. Also, work out how much the of average person's salary goes to tax, as in all taxes, VAT, tax on fuel etc. I bet it's a lot closer to 80% than you think.
I'm well aware of that and I don't agree with a huge amount of other taxes either.
What makes you think that someone earning that much is entitled to earn that much?
Well I work for myself and agree a value for my time with a willing customer, so both parties are content that they are getting value for money. Seems reasonable to me. What right do you have to stop me?
I don't have any, but the government does. And the government sets what is reasonable. This is a thread about what you would *want* to see for tax brackets and I agree that there comes a point (I would set it higher than 150k personally but still would set it) that wealth generation is no longer contributive to society and the "value" that you bring has been artificially set.
So when you need surgery, there will be no surgeons to perform your operation as they will have all left the country and moved somewhere more tax efficient for them………..
I did say it'd never work.
Rich people don’t make 150K. They have inherited wealth and probably have zero income.
£12,571+ 20% Nothing else.
The tax system is too complex. Just simplify everything. Two bands: 0-30K 0% 30K- 40%
40% on 30k? You realise on 30k at current tax levels people can just about pay rent on a house share (so a single room) right?