60% income tax rate

lostinrates

JayScottGreenspan wrote: »

For your average family claiming tax credits, housing benefit and council tax benefit, every extra pound they earn makes them about 10p better off.

This is the case up to about £30k gross pay.

and after that?

Thank you, and to thelawnet, too.

JayScottGreenspan

lostinrates wrote: »

and after that?

Thank you, and to thelawnet, too.

Then 31% for a bit (up to about £4k), then 41% for a bit. And then the rich boys start moaning.

hermanmunster_3

mitchaa wrote: »

Personal allowance = £6475, removal of this at the 40% rate will cost £2590 pa or £216 pm

If you are earning £112k, your take home will currently be £6,032pm, after the removal of the PA your salary will drop down to £5,816pm so works out around a 3.6% deduction in take home.

Hardly a big kick in the teeth when you look at the 3.6% figure.

If you were to take a 3.6% hit from the average £26,020 salary, it would equate to around £60pm. A pain in the ar*e i agree but hardly something to get your knickers in a twist about.

Actually 3.6% decrease takes the pay back quite a few years - personally I do not want to lose 3.6% and feel it is entirely reasonable to be unhappy about. Best solution is to do less work and get them to employ less experienced doctors to do it instead - will be nice to have some more weekend time at home.

hermanmunster_3

lostinrates wrote: »

I wish someone explain to me how it is legally possible to avoid taxation on PAYE

tricky lostinrates - not a lot can be done - just have to make sure to claim for all expenses possible eg car / indemnity / professional subs / equipment. making sure that non tax payer (if there is one handily available) has the savings in their name.

thelawnet

JayScottGreenspan wrote: »

You're missing housing benefit and council tax benefit.

Housing benefit is withdrawn at a rate of 65% and council tax benefit is withdrawn at a rate of 20%. Both start being withdrawn at very low wages because the income threshold involved includes tax credits.

It's quite complex, I think the income level is based on the income support amount. I'm not entirely sure how much that is for 2 parents, 2 kids.

Rates are here:

http://www.jobcentreplus.gov.uk/JCP/stellent/groups/jcp/documents/websitecontent/dev_015666.pdf

I think it is
£100.95 for a couple
£17.30 for family
£56.11 for children
= £9066.72 per year

So if you work 16 hours at NMW you earn minimum 52 * 16 *£5.73 = £4767.36.
Add in the benefits at £9540

and that's £14307, which is £5240.94 'too much'. Multiply by 20%, and you've lost £1048.19 off your council tax benefit and £3406.61 off your housing benefit.

That's 'working the minimum' to get tax credits. Obviously £1048 is probably close to what most people in such circumstances pay in council tax. You're looking at a loss of 85% presumably up to the personal allowance (£6420). But at that level the amount of council tax benefit lost is up to £1420. Which means in fact there's probably nothing left.

I guess in theory if you have very high housing benefit levels (maybe in central London or something) you could be looking at losses in excess of 100% - which would happen for someone earning over the personal allowance with a large housing benefit allowance - presumably you'd lose 65% hb, potentially 20% ct benefit, 31% tax, and 39% tax credits = 155%.

thelawnet

JayScottGreenspan wrote: »

For your average family claiming tax credits, housing benefit and council tax benefit, every extra pound they earn makes them about 10p better off.

This is the case up to about £30k gross pay.

I think you can get very high losses >70% at around £5-£7k depending on your housing benefit levels, but at £30k I don't think so.

thelawnet

thelawnet wrote: »

I think you can get very high losses >70% at around £5-£7k depending on your housing benefit levels, but at £30k I don't think so.

Of course, 70% is still absurd. For instance a married couple with husband on £22k, wife not working, 1 school aged child, wife wants to take a job in local supermarket while child's at school - she will only end up with 30% of what she earns. Not worth the effort, and of course it's all stupidly confusing and complicated.

They should scrap child tax credit and just put it on child benefit instead (at a lower rate). No means testing. If people want more money they can go and get a job. Government paying for childcare seems more reasonable, because this is contingent on actually getting a job, but otherwise not.

Hopefully the Tories will scrap it when they win the next election.

Making child benefit much higher and not means tested will hopefully encourage the more affluent to have kids. Our birthrate is too low, and we are meeting the shortfall with immigration, which is not really a good idea.

JayScottGreenspan

thelawnet wrote: »

I think you can get very high losses >70% at around £5-£7k depending on your housing benefit levels, but at £30k I don't think so.

Thanks for your post above. Very interesting.

If you've got savings and don't get HB, or if you own your home, the marginal rate for a 2+2 family is 70% up to about £29k. That 70% comes from 20% PAYE + 11% NI + 39% tax credits withdrawal. £9k of tax credits starts to be withdrawn at ~£6k and is fully withdrawn at ~£29k.

Housing benefit is withdrawn at a rate of 65%, but on your net income. So earn an extra pound and 70p goes from tax and tax credits, then 65% of the remainder (19.5p) goes in HB withdrawal. So HB adds 19.5% to the marginal rate.

For a 2+2 family paying rent of £9k, HB phases out at about £29k too. Lower rent and it obviously phases out sooner.

PasturesNew

As even at today's rates people earning £100k take home £5,400/month ... do I really care if they pay a bit extra tax?

No.

Do they care that I and hundreds of thousands of others take home only £1000/month and never have spare money for "fun" things like hobbies/holidays or a social life? No. So I don't feel bad about that.

thelawnet

JayScottGreenspan wrote: »

Thanks for your post above. Very interesting.

If you've got savings and don't get HB, or if you own your home, the marginal rate for a 2+2 family is 70% up to about £29k. That 70% comes from 20% PAYE + 11% NI + 39% tax credits withdrawal. £9k of tax credits starts to be withdrawn at ~£6k and is fully withdrawn at ~£29k.

Housing benefit is withdrawn at a rate of 65%, but on your net income. So earn an extra pound and 70p goes from tax and tax credits, then 65% of the remainder (19.5p) goes in HB withdrawal. So HB adds 19.5% to the marginal rate.

For a 2+2 family paying rent of £9k, HB phases out at about £29k too. Lower rent and it obviously phases out sooner.

Hmm, if it comes off net income that seems about right. £9000 rent means you can have £9000/.65 of excess income (above income support level) = £13846. You get £9000 just in tax credits and £5000 for 16 hours NMW. Income support level is £9000, so the £5k NMW, which is paid gross, as below PA and tax credit withdrawal level, comes off only HB. £5k * .65 = £3250 off HB. That leaves £5750. Add about £1200 of wages to reach PA/tax credit withdrawal threshold, which is paid gross, and that's £780 off HB. THis leaves £4970. To lose that you need £7646 of net income (£4970 /.65). £7646 of net income is £7646 /.3 = £25846.

£25846 + £6200 = £32,046 gross income