'Don't pay your kids tuition fees upfront' Discussion Area

Soubrette

setmefree2 wrote: »

Don't think about what's happening in total, think about what's happening with each marginal £ that's earned.

You may not think the margin matters but it does because a system that taxes too highly at the margin disincentivizes people to work. If working for that extra £1 means that you just end up paying tax and getting very little to keep for yourself then you will be demotivated from working for that extra £1.

imho expecting people to pay 41p on each £1 to HMRC at a salary of £21,001 is too much. It's a burden and I don't think it's right.

I couldn't agree more with you setmefree - the margin of tax is ridiculous and as a 52p tax is deemed too high by the Conservatives when talking about people earning over £150,000pa, I'd like them to explain why 41p as a top rate of tax is ok if you earn over £21,000pa and happen to be an ex-student.

The spin used of course is that when the tax rate is looked at, it is a loan, most people won't pay it all back and then it will be written off.

When the amount owed is looked at, suddenly it becomes a tax, nothing to worry about just an extra 9% which actually isn't that much anyway really.

Successful governments are likely to claw back as much of the tax/loan back as they can - simple things like never raising the threshold that the payments kick in - at approx £42,000pa as an average wage throughout your loan paying back career, you will finish paying off the £80,000 odd that you owe just as it's about to written off - at the moment that seems a reasonable wage to say that most people won't pay it all back - but what about in 10/15/30 years time?

What also emphasises to me the unfair nature of this loan/tax is that if you earn more than £42,000 you pay off your loan quicker and so pay less overall then the £42,000 earner - nice one to look after your own, Conservatives!! and yes, suddenly it's a loan again.

To the OP - should you pay it up front - it's hard to tell but I think in some circumstances it would be worth it.
So if there is a huge probability that your child will be in an industry where they will be earning approx £42,000pa - pay it up front.

In other instances it won't be worth it
If your child is going to be in an industry where they will be earning approx £20,000 or under - don't pay it up front.

The problem is that in general we just don't know what the future holds for our children and so like insurance, it's all about the probabilities.

The_One_Who

setmefree2 wrote: »

You will also have to find 20p to pay your income tax and another 12p to pay your NI contributions. So you have to find 41p for each £1 you earn.

I take it the other 9p is coming from the student loan? If you are earning £15,001 you'll pay back 9p per year, not per pound earned. That's rather misleading. It's also rather misleading to say that someone will pay 32p for every pound earned in tax.

setmefree2 wrote: »

Don't think about what's happening in total, think about what's happening with each marginal £ that's earned.

You may not think the margin matters but it does because a system that taxes too highly at the margin disincentivizes people to work. If working for that extra £1 means that you just end up paying tax and getting very little to keep for yourself then you will be demotivated from working for that extra £1.

imho expecting people to pay 41p on each £1 to HMRC at a salary of £21,001 is too much. It's a burden and I don't think it's right.

So, manipulate it so that it suits your point rather than looking at it in reality? I prefer to look at the situation with regards to net and gross annual salaries. Saying that someone will be 41p in every pound (essentially a 41% tax rate) is just wrong, and rather depressing.

Soubrette

The_One_Who wrote: »

I take it the other 9p is coming from the student loan? If you are earning £15,001 you'll pay back 9p per year, not per pound earned. That's rather misleading. It's also rather misleading to say that someone will pay 32p for every pound earned in tax.



So, manipulate it so that it suits your point rather than looking at it in reality? I prefer to look at the situation with regards to net and gross annual salaries. Saying that someone will be 41p in every pound (essentially a 41% tax rate) is just wrong, and rather depressing.

I don't think it is manipulating the figures as it is how these things are expressed in our country - you move into the 40% tax rate or 50% tax rate then you talk about paying 40% or 50% tax - everyone knows that everyone is entitled to the same allowances etc and that they don't pay 50% on all of their money (although I do feel as a matter of course we should include NI as that's just a tax too).

Yet the Conservatives admit that the 50% tax rate is a disincentive and want to abolish it.

Oldernotwiser

setmefree2 wrote: »

By the way, I'm not talking anyone into or out of anything. When it comes to money people should make their own minds up.

Except, presumably, students!

Oldernotwiser

setmefree2 wrote: »

imho expecting people to pay 41p on each £1 to HMRC at a salary of £21,001 is too much. It's a burden and I don't think it's right. It's tax by stealth and it's only being levied against young people.

No it isn't. Everybody who studies full time at university level will pay it.

Soubrette

Oldernotwiser wrote: »

No it isn't. Everybody who studies full time at university level will pay it.

Anyone who takes out a loan and studies full time at university level

Oldernotwiser

Soubrette wrote: »

I don't think it is manipulating the figures as it is how these things are expressed in our country - you move into the 40% tax rate or 50% tax rate then you talk about paying 40% or 50% tax - everyone knows that everyone is entitled to the same allowances etc and that they don't pay 50% on all of their money .

Actually they don't. You'd be surprised how many people on various MSE boards believe that 40% taxpayers pay that on all their income, or at least all their income over the Personal Tax Allowance.

The_One_Who

Oldernotwiser wrote: »

Actually they don't. You'd be surprised how many people on various MSE boards believe that 40% taxpayers pay that on all their income, or at least all their income over the Personal Tax Allowance.

Exactly. To tell a seventeen year old (who will no doubt have no understanding of taxation, or even that students are liable to pay tax) that they will be paying 41p in every pound in tax, is misleading.

Soubrette

Oldernotwiser wrote: »

Actually they don't. You'd be surprised how many people on various MSE boards believe that 40% taxpayers pay that on all their income, or at least all their income over the Personal Tax Allowance.

If that is true then I am actually quite shocked by that.

Soubrette

The_One_Who wrote: »

Exactly. To tell a seventeen year old (who will no doubt have no understanding of taxation, or even that students are liable to pay tax) that they will be paying 41p in every pound in tax, is misleading.

Actually I would call that a lie.

To say that their top rate of tax is in effect 41p in the pound is the truth.