Do You Think Income Tax Banding is Fair?

CLAPTON

Thrugelmir wrote: »

Raising personal allowances is a transparent policy.

Hopefully the first steps in simplification.

NI is an employment tax . So cannot be applied to investment income or pension income for example.

So I'm unsure as to the best way of intergrating the taxes. Which is the obvious long term aim.

I'm not sure why raising personal allowance is any more 'transparent' than changing any tax band.

And I can't see why simply changing a band is a simplification.

With the new rules of linking child benefit with tax on incomes, our tax system has just got a whole lot more complicated.

Governments have got no intention of simplifying the tax system whatever words they use: just look for actual actions.

guruchelles

zagfles wrote: »

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.

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?

I think employers should pay people more in general, ie. the minimum wage should be higher. I wasn't specifically talking about the wage of £20k.

I do agree with your first point. I'm sure I read on here somewhere that France (maybe?) had a system whereby your tax allowance took into account how many dependents you had. Please correct me if I dreamt that.

The whole system seems to penalise families in which there is one high wage earner. The new Child Benefit rules, for instance, mean that a household in which one parent looks after the children could 'bring in' no more than £50k before CB started to be reduced, whereas the next door neighbours with two working parents could have a household income of £99k and still receive CB. This puts zero value on SAHPs. There should be a cut off for CB, but it should be based on the whole household income.

Thrugelmir

guruchelles wrote: »

I think employers should pay people more in general,

And the UK lose more jobs overseas.

Labour markets are global.

Thrugelmir

CLAPTON wrote: »

Governments have got no intention of simplifying the tax system whatever words they use: just look for actual actions.

Well the previous administration changed the rules every year. So going to take some years to unwind again.

zagfles

guruchelles wrote: »

I think employers should pay people more in general, ie. the minimum wage should be higher. I wasn't specifically talking about the wage of £20k.

Yes, but a "living wage", ie one where no benefits/tax credits are required, will vary enormously depending on dependants. So you can't expect employers to pay a wage that is "living" to everyone unless you expect them to pay more to people with kids.

I do agree with your first point. I'm sure I read on here somewhere that France (maybe?) had a system whereby your tax allowance took into account how many dependents you had. Please correct me if I dreamt that.

That's right. In France you get a tax allowance per adult, half a tax allowance for the first two kids, and a full allowance for any other kids. Same applies to the tax bands, someone with 3 allowances would get 3 times as wide tax bands. (Technically they split the income into "parts", but the effect is exactly the same).

Other countries like Spain and the US have similar systems.

The whole system seems to penalise families in which there is one high wage earner. The new Child Benefit rules, for instance, mean that a household in which one parent looks after the children could 'bring in' no more than £50k before CB started to be reduced, whereas the next door neighbours with two working parents could have a household income of £99k and still receive CB. This puts zero value on SAHPs. There should be a cut off for CB, but it should be based on the whole household income.

Why should there be a cut off at all? Use tax rates to take more money off the "rich", rather than benefit withdrawal. Then you get consistent marginal rates rather than random spikes.

grizzly1911

Thrugelmir wrote: »

Well[STRIKE] the[/STRIKE] previous administrations changed the rules every few years. So [STRIKE]going to take some years to unwind again[/STRIKE] unlikely to happen anytime soon.

Fixed that for you.

grizzly1911

Thrugelmir wrote: »

Raising personal allowances is a transparent policy.

Hopefully the first steps in simplification.

NI is an employment tax . So cannot be applied to investment income or pension income for example.

So I'm unsure as to the best way of intergrating the taxes. Which is the obvious long term aim.

Why don't they simply increease the tax rates? Their only intention is to maximise tax take. The current tinkering is creating winners and losers so that isn't a concern to them.

They seek to obfuscate. It suits their purpose.

madeupname1

guruchelles wrote: »

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.

Dont forget, anyone over £100k starts to lose their personal allowance until about £116k (I think) when it is totally gone. So there is an additional jump in liability between 40% threshold and 45% threshold.

N1AK

Thrugelmir wrote: »

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

The issue is that any decrease in tax (for example by increasing the tax threshold on individual earners in a couple) need to be matched by spending cuts or tax rises.

Personally I think the current threshold is fine. £42k is a good wage and it's enough to support a family of 4 without hardship. As someone already pointed out if you also have a pension you can earn another ~£2.5k by putting 5% into that which will often be matched. You can also donate money to charity (for example sports clubs, youth groups etc in your area) which will indirectly improve you and your families lives.

Fella

N1AK wrote: »

The issue is that any decrease in tax (for example by increasing the tax threshold on individual earners in a couple) need to be matched by spending cuts or tax rises.

Personally I think the current threshold is fine. £42k is a good wage and it's enough to support a family of 4 without hardship.

Depends where you live surely. I'd say supporting a family of 4 on £42k in London or most of the SE is breadline stuff. The typical mortgage payments alone would be a huge chunk of your take-home pay. Assuming reasonable provision was being put by for the cost of those kids during their teens etc I think £42k would be a massive struggle.