Do You Think Income Tax Banding is Fair?

Tancred

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.

True, £41k is not a huge amount, but a bigger tax free allowance, which is what I would favour, should compensate for the higher marginal rate of tax. There is a lot of paranoia about high income tax rates, but in reality only a small minority are really affected significantly.

Lokolo

N1AK wrote: »

When you ignored investments (shares), loans and charitable donations from your figures thus meaning they didn't add up. Not rocket science and all you're doing now is making it look like you still can't work out why you messed up or are so determined to defend the impossible that you can't let it go.

I take it the 50% going to uni figure (it's 40% actually) is also right because you're accounting for the fact you like to add 10% to percentages when you make them up?

If you could think rationally for a few moments you'll notice I didn't refer to the pension, but don't let that stop you from attacking me for having done so in your imagination.

I'M attacking YOU? Oh give over.

The loans are a resonable judgement. If you are going to nit pick, please find out how many NON students earn £40k a year and then tell me its not a resonable assumption to make?

The charity, fair enough, but thats still only an extra £40 a month.

I haven't made up the figures at all, they're all there in black and white, if you want to look at my payslips you can go ahead! I'm not trying to backtrack at all. I haven't said anything to suggest it either.

How much do you think is resonable for pension contributions? If you are going to pick at my figures I will reclaculate based on WHAT you think because obviously you're always correct and no-one can ever have figures to go against you.

N1AK wrote: »

I'll respond to you rather than Lokolo, as he's in full on denial mode. Personally I will accept a standard ~5% of less pension contribution (or equivalent investment) as everyone should be planning something for later life.

The main reason I didn't/don't accept the student loan (especially for graduates before the massive ramp up) is that it is a comparatively short term cost for them if they're, or nearly are, a higher rate tax payer; probably in the region of 3-4 years to pay off once they reach that point.

People on the new, larger, loans could more validly claim it was a tax as even as, just, higher rate payers it could take a couple of decades to pay off.

Fine you have gone for 5%.

that is 3% more from me. This is £100 a month extra. My charity contributions of £50, plus share scheme of £150 means theres an extra £80 on top to make a resonable assumption. (£50 + £150 - £100 pension * 0.8)

So on top of the £680, I should have £760 according to you. Is that fair enough?

p.s. I am hardly in denial mode.

gorgeyetsun

Both my wife and I had student loans from Uni. My wife also had an additional student loan from when she did her PGCE. Naturally, we paid them off prior to having kids. We knew kids would be expensive so we made sure that we reduced our outgoings as much as possible to make sure we could afford them.

This happened because we live in the Real-World. Had we lived in MSE land we would have woken up one day with our 2 kids and be sat wondering how we would make ends meet.

Tancred

Fella wrote: »

Basic rate tax isn't low rate. And someone on £60k would be paying a lot of it and a lot of NI too (especially once you factor in the NI their employer would be paying on their £60k wage).

Regarding how I'd pay for it, that's too much to go into, on this thread anyway. I think our finances should be run very differently to how they are.

You can easily reduce the tax you pay by putting in more money into your pension scheme through salary sacrifice etc. You'll then get your money back upon retirement.

N1AK

grizzly1911 wrote: »

Why not divide your salary by 12?

I think his point is that it would make it more visible to people who might not otherwise consider it. It's a fair point, although I'm not sure I'd like the result of it personally.

I use a program to track my finances so am painfully aware of how much money get's deducted. Since the start of 2010: £22,680.22 in income tax and national insurance. Sure it's a lot of money and I'd love to have kept some of it but I can't see why I should have given that I have a good income and we're taxing people earning that over two years!

Lokolo

Also, apologies but I am in full denial mode. Can I ask what I am in denial about?

I am mostly confused as to when I have, even just looked over my posts and am wondering where I am in denial. And where I attacked you. Hmm very odd.

N1AK

Lokolo wrote: »

p.s. I am hardly in denial mode.

In response to your last question, on the assumption it is genuine. My point was never that had you explained the loan, charitable giving, share schme etc there was anything wrong with your example. However posting up that you have an income of x and a budget of y with a remaining amount of z which bares little relation to those was bound to be questioned. If you had just said, my bad I didn't mention the money I am giving to charity, paying off my student loan and buying shares with that would likely have been the end of it.

Lokolo

N1AK wrote: »

I deny denial be derived of me nor my denial of denial be decried. Your figures had more holes in them than than a fine grade sieve and your protestations to the contrary have if anything simply emphasised it and your lack of objectivity. But as I didn't come here to discuss you or imaginary numbers I shall leave it there.

Please tell me where my figures have holes in them?

I have yet to lie about a single figure.

Unfortunately I do not have electronic payslips, they are at home, so I can't show you one. I will quite happily show you later on this evening if you would like?

I am still confused about what I am in denial about, and you have yet to come fourth with any resonable view of what I am in denial about, when I attacked you and what is wrong with my figures.

Also

Earn £40,000 in 2012/2013 and you'll take home £25,954. This means £2,163 in your pocket a month.

This is based on 5% pension + student loans which you think is the only resonable deductions you could possibly make.

My outgoings in my original post were £1492. So from what you believe are resonable deductions, I have £671. Quite near my figure of £680!

Tancred

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.

How to make up the shortfall? By what the government is doing at the moment - freezing the 40% threshold. I prefer having a bigger tax free allowance (£12k or so) and a lower 40% threshold. The reason? Although I currently earn around £63k I am fully aware that I could be kicked out of my job at the whim of the CEO and I like the safety net of a higher tax free allowance. I also like to think that lower paid people and pensioners keep more of their money.

I'm comfortable - a wife who works full time, no kids and a modest house with a modest mortgage.

Fella

Tancred wrote: »

You can easily reduce the tax you pay by putting in more money into your pension scheme through salary sacrifice etc. You'll then get your money back upon retirement.

Of course it's then taxed when you draw it as a pension and you have absolutely no idea what restrictions will be on pensions by the time you draw it or what the tax rate will be.

Paying into a pension is one part of managing your finances but certainly not a no-brainer. I have some conventional pension funds but in general I support that view that sacrificing the tax-breaks pensions give you up front is more than made up for by having complete control over your money (& not paying income tax when you come to spend them).