Reduction in top, 50%, rate of tax?

grizzly1911

Interesting high taxes are stifling the recovery.

I am surprised that 300,000 plus people are paying it.

I am sure this number will reduce this year as they work their way round it.

Last year they were caught out by it's speedy introduction.;)

CLAPTON

seems odd to me

there is a growing feeling from 'top' tories / businessmen and telegraph readers that people earning over £150,000 that having to pay 52% marginal deduction (50% tax + 2% NI) is a terrible disincentive to work in the UK

howeve those same people fully support the principle that successful young graduates earning only (say) £45,000 should pay 51% marginal deduction (40% tax + 2% NI +9% Student loan) and don't seem to believe this is a disincentive for them

curious

Pennywise

Whether it's right or not, the reality is that those earning over £150k are more mobile and have more choices.

Easy enough to for the richer to "offshore" themselves, make sure they don't spend too many days in the UK and therefore don't pay any income tax in the UK at all.

Also, easy enough for them to work fewer hours or put more money into pensions or whatever to avoid the 50% rate, whereas someone earning a lot less doesn't have the choice as they need to earn all they can and can't afford pensions.

OK, may not appear fair, but that's the reality. You have to be pragmatic. Would you rather the Treasury got 40% of £200,000 or nothing at all if someone moves to a low tax regime?

At the end of the day concepts such as fairness and other "feel good" political gestures don't bring money into the Treasury to pay the bills.

zygurat789

Pennywise wrote: »

Whether it's right or not, the reality is that (some of) those earning over £150k are more mobile and have more choices. But, of course, there are some who are not mobile.

Easy enough to for the richer to "offshore" themselves, make sure they don't spend too many days in the UK and therefore don't pay any income tax in the UK at all. And how many days is that then?

Also, easy enough for them to work fewer hours or put more money into pensions or whatever to avoid the 50% rate, whereas someone earning a lot less doesn't have the choice as they need to earn all they can and can't afford pensions. And suffer a marginal tax rate of 73%.

OK, may not appear fair, but that's the reality. You have to be pragmatic. Would you rather the Treasury got 40% of £200,000 or nothing at all if someone moves to a low tax regime? It really is a shame that all those bankers whio caused all these problems and all rthose company directors who have paid themselves more than can be justified didn't do just that.

At the end of the day concepts such as fairness and other "feel good" political gestures don't bring money into the Treasury to pay the bills.

It's the same the whole world over.......

ceeforcat

CLAPTON wrote: »

seems odd to me

there is a growing feeling from 'top' tories / businessmen and telegraph readers that people earning over £150,000 that having to pay 52% marginal deduction (50% tax + 2% NI) is a terrible disincentive to work in the UK

howeve those same people fully support the principle that successful young graduates earning only (say) £45,000 should pay 51% marginal deduction (40% tax + 2% NI +9% Student loan) and don't seem to believe this is a disincentive for them

curious

Spot on - and just wait until 2013 when a family with one earner who creeps into higher rate tax loses all their child benefit! Marginal rate could be 100% in some cases!

CLAPTON

Pennywise wrote: »

Whether it's right or not, the reality is that those earning over £150k are more mobile and have more choices.

Easy enough to for the richer to "offshore" themselves, make sure they don't spend too many days in the UK and therefore don't pay any income tax in the UK at all.

Also, easy enough for them to work fewer hours or put more money into pensions or whatever to avoid the 50% rate, whereas someone earning a lot less doesn't have the choice as they need to earn all they can and can't afford pensions.

OK, may not appear fair, but that's the reality. You have to be pragmatic. Would you rather the Treasury got 40% of £200,000 or nothing at all if someone moves to a low tax regime?

At the end of the day concepts such as fairness and other "feel good" political gestures don't bring money into the Treasury to pay the bills.

as I understand it, there is no actual evidence either way.

a great many of them are born in the UK have and Uk wifes and have kids at UK schools and enjoy a UK lifestyle and they are unlikely to want to go abroad

non UK people may well be much more mobile but as I say there seems no hard evidence either way

(I exclude nonsense evidence like .. ' ask a few high earners whether they were thinking about leaving because of the high tax rates)

chrismac1

This is a bit like all the fuss that the Minimum Wage would wreck the UK economy. It didn't, it was the highly paid bankers! ceeforcat makes a good post about the complete inconsistency over worrying about a high marginal rate of tax for someone on £250k but not a new graduate. At the same time, the UK has a high tax take and our public sector is way too bloated in relation to our economic performance so any further increases would in my view very likely reduce the overall tax take.

agrinnall

Chrismac1, I'm a bit surprised you didn't make a comment about the likely result of the Chancellor asking HMRC to evaluate whether dropping the 50% band would lead to an increased tax take, given your usual views on their ability to do anything right .

pleasedelete

My OH will earn just over £150k this year. You get no basic tax allowance either which isn't as often highlighted.

He is looking for a new job and has decided to no longer be based in the UK. He travels anyway as part of role but has never before done the full employment overseas thing before. He has looked at a number of options and pays less tax with all of them. He will pay tax in the country he bases himself in- he isn't looking at a tax free country.

Some of his colleagues have already gone. Lots of others are considering it.

I know it's only one story. I am sure as many wouldn't consider it.

CLAPTON

pleasedelete wrote: »

My OH will earn just over £150k this year. You get no basic tax allowance either which isn't as often highlighted.

He is looking for a new job and has decided to no longer be based in the UK. He travels anyway as part of role but has never before done the full employment overseas thing before. He has looked at a number of options and pays less tax with all of them. He will pay tax in the country he bases himself in- he isn't looking at a tax free country.

Some of his colleagues have already gone. Lots of others are considering it.

I know it's only one story. I am sure as many wouldn't consider it.

very interesting post.

could you give some more details

-was the tax the only or main issue or was the wish to live abroad as a lifestyle choice a factor?

-do you have school aged children (would that make any diffference?)

-are you joining him abroad or are you staying in the UK

or any other points you many think would be of interest

pleasedelete

CLAPTON wrote: »

very interesting post.

could you give some more details

-was the tax the only or main issue or was the wish to live abroad as a lifestyle choice a factor?

-do you have school aged children (would that make any diffference?)

-are you joining him abroad or are you staying in the UK

or any other points you many think would be of interest

We have 2 children. 14 and 16. Both doing school then hopefully uni. Both at state schools.

I was made redundant earlier this year (earnt less than him about 80k). I am now contracting and doing ok. We will stay in the uk.

He has been everyday in the uk for about 2 years. Before that he travelled to Europe for about 5 years (but spent 70 per cent time in uk) and prior to that travelled extensively (about 30 per cent but very worldwide) but was uk based. He could really be based anywhere in the world.

The preferred area he works in has increasingly moved off shore (not banking) in past 5 years but a lot is still uk based.

It isn't a lifestyle choice. We have 2 children and increasingly financially dependent relatives (his parents have no private pension). We have seen our relative income gradually reduce over the past few years with increases to tax and NI. We both work 60- 70 hour weeks and have done for past 20 years.

Yes having more money is the only motivation.