Why is take home pay in the UK, so much less than other Western Countries?

RevolvingDoor

drc wrote: »

How come the US and Germany can have a fairly well functioning society without high taxes? I know the Americans have to pay for health care separately but it can't be that much and presumably they get much better quality care as they can choose what to pay for and which insurance to go with?

Ha, you are joking aren't you? Have you ever spoken to people from the US about their health care system?

Pupnik wrote: »

It is actually the leading cause of bankruptcy in the United States by quite a large lead. I would much rather pay NI and not have to worry about whether I can afford to call an ambulance. I have many friends in the US who do not have health insurance because they can't afford it and they get extremely stressed out when they get sick and have to toss up whether it is worth the cost of visiting a GP - it is a terrible system for an advanced society.
As an example of costs, it can cost up to $100,000 for breast cancer treatment and $30,000 for a complicated childbirth so we are certainly not talking small change.

+1.

Conrad

drc wrote: »

I favour raising VAT, rather than taxing income, especially VAT on non essentials. That way everyone pays, not just those on PAYE.

I have to say that my self employed and company director clients generally have a take home income that in no way reflects the official income the Taxman uses.

This masking accross millions of folk means true earnings are way higher than the stats indicate.

Fairly typical for me to meet clients with c£7000 p month take home, yet tax is of the order of just £15000 pa. If you gross up thier £7k per month using employed tax and NI numbers, thier true gross earnings are of the order of £100k+, yet official income stats will show these folk as barely middle earners.

To be frank this is not fair on PAYE people who are the ones doing all the heavy lifting.

drc

rtho782 wrote: »

Some of the figures in the OP are a little suspect, so I'll do my own calculations.

National Average UK salary is around £26k.

UK:
Salary: £26,000
Tax: £3,579.00
NI: £2,208.96
Take Home: £20,212.04

You have to also note that for an employer to pay you £26k they need to pay Employers NI, on £26k this is £2,554.66 a year, meaning that the equivalent US salary would be £28,554.66 (as in, for the same cost they could employ a US worker on that amount)

US
US Salary: $46,524.11 (£28,554.66)
Tax: $4,839.15 (£2,970.26)
NI/Social Security: $2,537.47 (£1,557.49)
Take Home: $37,534.38 (£23,037.14)

In other words, in the US, the same cost to the employer results in a 13.97% larger pay packet. In fact, at the UK average salary this is enough to pay for private health insurance for a single person and have a chunk left over.

Now factor in that Sales Tax is much lower than VAT, and I believe property tax is much lower than Council tax, and certainly housing costs are much lower.... Seems like we get a bit of a raw deal.

Thank you.

N1AK

drc wrote: »

I just did a calculation for a PAYE salary of £50k (a just above average wage). The calculation is as follows;

Tax: £9884
NI: £4,337
Take home pay: £35,778.

In contrast, a salary of 50 euros in Germany gives you;

Tax: euros 8,212
NI equivalent: euros 266
Take home pay: euros 41,521

Why is tax/NI in the UK so much more? Where is it all going?

I believe your German figure is incorrect (it is based on a couples allowance). A single German would have take home income of €36,446 pretty much in line with the UK income (as the German is earning ~18% less).

A German earning €61,000 pays 30% tax as a single or 20% as a couple. The UK earner is on 28% tax.

What you need to remember is that the German couple allowance is shared so two mid-high level earners are noticeably worse off than they would be in the UK system.

N1AK

zagubov wrote: »

I've also seen figures showing the US spends double on healthcare per capita what we do (I'm in the UK). The outcomes are worse ( we outlive them slightly).

We shoot less of our children and aren't as obese; I'm not defending their healthcare system but average life isn't an accurate measure of healthcare quality (though clearly there is a relation).

The US healthcare system is excellent if you can afford to pay for a good provider. If you can only afford the cheapest or nothing at all then it's far far worse than most national systems in the western world.

[Deleted User]

And everyone thinks the grass is greener elsewhere...

I once worked for an American healthcare IT firm.. they had a charity that would help fund the bills for children who were dying, but the state wouldn't pay for them.

That says it all when a country has the medical capabilities to help someone yet won't because they're too poor

BTW - the people who wait in A&E for 4 hours are typically those who shouldn't be there in the first place. The NHS is clogged up and misused by so many time-wasters it's unbelievable.

Edit: Forgot to mention - if you think student fees in the UK are expensive now, you should see how much an ivy league education is going to cost you

Kennyboy66

Conrad wrote: »

I have to say that my self employed and company director clients generally have a take home income that in no way reflects the official income the Taxman uses.

This masking accross millions of folk means true earnings are way higher than the stats indicate.

Fairly typical for me to meet clients with c£7000 p month take home, yet tax is of the order of just £15000 pa. If you gross up thier £7k per month using employed tax and NI numbers, thier true gross earnings are of the order of £100k+, yet official income stats will show these folk as barely middle earners.

To be frank this is not fair on PAYE people who are the ones doing all the heavy lifting.

What are they paying themselves, in cash - or simply not declaring income ?

The legal income tax & NI savings from incorporation are nowhere near what you are suggesting.

Conrad

Kennyboy66 wrote: »

What are they paying themselves, in cash - or simply not declaring income ?

The legal income tax & NI savings from incorporation are nowhere near what you are suggesting.

A variety of measures. You have to understand such people think about these things day after day, year after year.

There is always an element of cash or other non declared earnings but also tools such as Directors loans. Paying your spouse say 40% of total business income after costs, can turn a £100k income into £60 + £40 for example. Consultancy fees to another business you might own where that business is paying rent on a property you own and so on and on.
You don't have to be Jimmy Carr to get your tax down to nothing.........[/

somethingcorporate

Conrad wrote: »

A variety of measures. You have to understand such people think about these things day after day, year after year.

There is always an element of cash or other non declared earnings but also tools such as Directors loans. Paying your spouse say 40% of total business income after costs, can turn a £100k income into £60 + £40 for example. Consultancy fees to another business you might own where that business is paying rent on a property you own and so on and on.
You don't have to be Jimmy Carr to get your tax down to nothing.........[/

My wife works for a company that specialises in tax schemes - not just on reducing annual income but on pensions etc. The brains that work on this stuff are far better paid than the brains in HMRC.

Plus, an annual income to these people is quite small compared to their overall (large) wealth so they are happy to take risks on what is perhaps quite a modest proportion of their assets. I wouldn't in a million years risk £1m in some of these crazy schemes but if you had £150m that represents such a tiny amount it can be worth the risk for the potential benefits.

Andy_L

rtho782 wrote: »

You have to also note that for an employer to pay you £26k they need to pay Employers NI, on £26k this is £2,554.66 a year, meaning that the equivalent US salary would be £28,554.66 (as in, for the same cost they could employ a US worker on that amount)

US employers & employees pay a similiar tax to NI to cover social security and Medicare, its a lower level (about 8% for employers) but you can't just hand-wave it away as you've done

rtho782 wrote: »

Now factor in that Sales Tax is much lower than VAT, and I believe property tax is much lower than Council tax, and certainly housing costs are much lower

Sales tax is lower but then there's no equivilant to state income tax or excise duty in the UK.