Do You Think Income Tax Banding is Fair?

guruchelles

In tax year 2013-14 personal allowance (for most people) will be £9440.

The 20% tax rate will apply to earnings up to £32010.

The higher rate of 40% will apply to earnings from £32011, plus the PA, which is £41450.

And if you're lucky enough to earn over £150000 you'll pay 45% tax on those earnings.

Is this, in your opinion, fair? Should the jump be from 20% to 40%? Should the 40% threshold have come down? Should the personal allowance have gone up?

Interested to hear opinions.

Thrugelmir

Higher rate tax is paid on earnings above £41k not £32k.

Given this is far above average earnings. Seems a reasonable level to be set at.

I agree with the LibDem proposal to increase personal allowance to a far higher level. As is a policy of fairness.

So I guess it's the 40% band that compensates.

If you are lucky enough to earn above the 40% level. Then you always save tax by increasing pension contributions for example.

flashnazia

I think anyone on NMW should not have to pay income tax. That's a threshold of around 11500 or thereabouts.

guruchelles

Thrugelmir wrote: »

Higher rate tax is paid on earnings above £41k not £32k.

Given this is far above average earnings. Seems a reasonable level to be set at.

I agree with the LibDem proposal to increase personal allowance to a far higher level. As is a policy of fairness.

So I guess it's the 40% band that compensates.

If you are lucky enough to earn above the 40% level. Then you always save tax by increasing pension contributions for example.

Have changed OP to make this more clear.

Adding to your pension is all very well, but you won't see the benefit now (and may not actually ever see it!)

Thrugelmir

guruchelles wrote: »

Adding to your pension is all very well, but you won't see the benefit now (and may not actually ever see it!)

Life is about maximising opportunity when it arises.

Many people lose their well paid jobs in later employment life.

guruchelles

Thrugelmir wrote: »

Life is about maximising opportunity when it arises.

Many people lose their well paid jobs in later employment life.

Yes, I understand that, and that adding to your pension could be a great move if you can afford to, but there is an element of gamble that you're actually going to reach pensionable age.

Also, I genuinely don't think that £41k is a huge amount, especially if you're the only wage-earner with children in a part of the country that's not cheap to live in. I'm not saying you'd be poor (I've been properly poor before and I'm under no illusions about this) but your take home pay would be about £2400pcm. You might need to spend nearly half of that on housing costs, then take off about £500 for bills and another £500 for groceries, clothing, fuel etc. That's not to mention savings, birthdays, Christmas. You're hardly living a luxury lifestyle and jetting off on holiday every five minutes.

dryhat

Any personal income tax from wages is not fair.

Thrugelmir

guruchelles wrote: »

Yes, I understand that, and that adding to your pension could be a great move if you can afford to, but there is an element of gamble that you're actually going to reach pensionable age.

Also, I genuinely don't think that £41k is a huge amount, especially if you're the only wage-earner with children in a part of the country that's not cheap to live in. I'm not saying you'd be poor (I've been properly poor before and I'm under no illusions about this) but your take home pay would be about £2400pcm. You might need to spend nearly half of that on housing costs, then take off about £500 for bills and another £500 for groceries, clothing, fuel etc. That's not to mention savings, birthdays, Christmas. You're hardly living a luxury lifestyle and jetting off on holiday every five minutes.

Take home this tax year is £2543 a month.

All the things you mention are down to personal choice. Possible to live comfortably without spending huge sums.

As for a pension. Statistically you are likely to live to a ripe old age.
So I wouldn't wish to retire on just the state pension.

ukcarper

Doesn't NI fall from 12% to 2% on earnings above £42K.

ukcarper

guruchelles wrote: »

Yes, I understand that, and that adding to your pension could be a great move if you can afford to, but there is an element of gamble that you're actually going to reach pensionable age.

Also, I genuinely don't think that £41k is a huge amount, especially if you're the only wage-earner with children in a part of the country that's not cheap to live in. I'm not saying you'd be poor (I've been properly poor before and I'm under no illusions about this) but your take home pay would be about £2400pcm. You might need to spend nearly half of that on housing costs, then take off about £500 for bills and another £500 for groceries, clothing, fuel etc. That's not to mention savings, birthdays, Christmas. You're hardly living a luxury lifestyle and jetting off on holiday every five minutes.

But over 80% of workers earn less than that.

Thrugelmir

ukcarper wrote: »

But over 80% of workers earn less than that.

Vast majority earn far nearer to £20k.