Do You Think Income Tax Banding is Fair?

guruchelles

Thrugelmir wrote: »

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.

I plugged 41k into a tax calculator and got it to take off 5% per month for pension.

No, I totally agree that having a pension is important, I just don't think that saying that people who earn enough to break into 40% tax can just put the extra into their pension is necessarily a good solution for all.

I understand what you are saying about personal choice, but I'm only talking about having a roof over the family head, bills paid, and food in tummies. To my mind, achieving these isn't indicative of being rich or wealthy.

I believe in tax, but can't help thinking that it might be more fair to stagger the increase (rather than jumping from 20% to 40%) and to sort it so that those people paying 40% tax or more are those who most people would agree were wealthy, by setting the threshold higher.

I'm genuinely interested to hear opinions/arguments, though, which is why I started the thread.

somethingcorporate

How would you make up the tax shortfall from increasing the personal allowance and staggering the 40% rate or making it higher?

If you're paying 40% and want the tax threshold moved it will always to be to a level that is higher than your current rate of pay.

I loath paying 40% tax so I do everything I can to keep my level low, childcare vouchers, pension, sharesaves etc. I'd expect any other sensible person to do the same.

guruchelles

Thrugelmir wrote: »

Vast majority earn far nearer to £20k.

As an aside, if you earned 20K and had three children, you would be entitled to around £600pm in child tax credits (don't shout at me if that's wrong - I used the HMRC TC calculator). Add that to your take home pay of about £1300pm and you'd 'only' be about £500pm less well off than the person who earned £41k.

I'm not saying tax credits are wrong (because I don't think they are) but that seems to me to be a perfect example of how the benefits system subsidises employers' failure to provide a decent living wage.

vivatifosi

The one aspect of income tax that I feel was wrong was the removal of the 10% tax band. I still can't get my head round the fact that it was a Labour government that did that.

guruchelles

somethingcorporate wrote: »

How would you make up the tax shortfall from increasing the personal allowance and staggering the 40% rate or making it higher?

If you're paying 40% and want the tax threshold moved it will always to be to a level that is higher than your current rate of pay.

I loath paying 40% tax so I do everything I can to keep my level low, childcare vouchers, pension, sharesaves etc. I'd expect any other sensible person to do the same.

To be honest I don't know how I'd make up the shortfall. I'm not professing to be a fiscal strategist, I just see it as being unfair. Ensuring that big corporations pay their fair share would probably be a good start.

In our personal situation childcare vouchers are useless as I look after the children, and my DH already pays 8.5% into his pension (although we may look at increasing this). I need to look into the share situation.

He's been working 16/18 hour shifts the last few days, working nights, and it's just a bit gutting to add up all the overtime and then have to slash 40% from it straight off.

Thrugelmir

guruchelles wrote: »

I'm not saying tax credits are wrong (because I don't think they are) but that seems to me to be a perfect example of how the benefits system subsidises employers' failure to provide a decent living wage.

So you believe wages should be at a higher level? On what grounds.

zagfles

guruchelles wrote: »

As an aside, if you earned 20K and had three children, you would be entitled to around £600pm in child tax credits (don't shout at me if that's wrong - I used the HMRC TC calculator). Add that to your take home pay of about £1300pm and you'd 'only' be about £500pm less well off than the person who earned £41k.

Yes. Shows how high the marginal rate of tax is on families. That's the problem with the system, allowances which are applied per earner not per person. £41k per person is a good wage, £41k shared between 5 isn't.

I'm not saying tax credits are wrong (because I don't think they are) but that seems to me to be a perfect example of how the benefits system subsidises employers' failure to provide a decent living wage.

Really? £20k is a "decent living wage" for a single person by most definitions. So do you think employers should pay someone more because they have 3 kids?

grizzly1911

Thrugelmir wrote: »

So you believe wages should be at a higher level? On what grounds.

In the example the OP uses, the point is being made that the state, so far have felt it necessary to subsidise someones wage.

I don't think it is necessarily a wage amount that is being questioned merely the principle.

Thrugelmir

grizzly1911 wrote: »

I don't think it is necessarily a wage amount that is being questioned merely the principle.

Benefit changes in the past 15 years has created an overly complex distorted system. Which requires simplification.

Shame the old married persons allowance was done away with. At least this supported couples where one stayed at home.

StevieJ

grizzly1911 wrote: »

In the example the OP uses, the point is being made that the state, so far have felt it necessary to subsidise someones wage.

I don't think it is necessarily a wage amount that is being questioned merely the principle.

Maybe we could reduce business taxes as an offset against increasing the minimum wage.