Student loan or graduate tax?

RoseV

People liken the student loan to a graduate tax.

If a student will earn above the 40% threshold (c£42,000) then their "tax" will be 49% (including the 9% student loan contribution.)

Now the government have declared that 50% tax is too much for people earning over £150,000 and that it will drive people away from the UK.

So my question is, why is no one saying that 49% is too much if a graduate is earning more than £42,000??!!

Is seems like double standards to me!! the (conflicting) messages are:

1) 50% tax is too much
2) 49% tax is fine, don't worry about taking out a student loan.

Surely you can't have it both ways??

Rose

Tixy

Whilst a student loan is sometimes likened to a tax it is not one.

If the argument is that 50% tax would drive people away from the UK then with a student loan even if people are working abroad they still have to pay their student loan back.
So the incentive is less for a 40% tax payer and 9% student loan payment to move out of the UK than for someone who is taxed at 50%.

spugzbunny

Well apparently it makes me a massive Tory for saying that I pay too much tax at 40% (46K sal). Add in my student loan and the fact that I have only been earning this much for a couple of years and I still can't afford a house! Yep, I definitely feel like one of the wealthy.

Just off to roll around in my money.

RoseV

Tixy wrote: »

Whilst a student loan is sometimes likened to a tax it is not one.

If the argument is that 50% tax would drive people away from the UK then with a student loan even if people are working abroad they still have to pay their student loan back.
So the incentive is less for a 40% tax payer and 9% student loan payment to move out of the UK than for someone who is taxed at 50%.

Thanks. Doesn't detract from the fact that it is still far too much!!

Tixy

RoseV wrote: »

Thanks. Doesn't detract from the fact that it is still far too much!!

Is it that you think 40% income tax is too much on earnings over £43575?

Or that you think 9% of earnings over £15,795 as a repayment for a student loan is too much?

Apples2

The Taxman takes my money without even allowing me the courtesy to even look at the green stuff.

At least RoseV has already had, and spent the money once, but now feels aggrieved she can't spend it again.

Maybe the whole concept of repayment is too much.

Thrugelmir

RoseV wrote: »

People liken the student loan to a graduate tax.

So you've benefited from your education by achieving a well paid position and think that other taxpayers should pay for it.

Those individuals earning over £150k may well have borrowed money from the banks to build their businessess. So are repaying their debts as well as paying tax.

Tixy

In real terms they are not really only 1% different in terms of deductions.

Take someone earning £50k and repaying a student loan - they may be a 40% tax payer, and may be repaying a student loan at 9% but their actual tax & student loan repayments would equal 24.6% of their salary.

Then take someone earning £150k who is not repaying a student loan - their actual tax would actually be 38.7% of their income.

I don't believe the gov have said that taxing someone at 50% is too much per se, just that taxing at that rate could mean those taxpayers may consider moving abroad to avoid that level of tax. And in general people earning £150k plus are probably much more able to relocate their business/employment overseas, resulting in lost taxes to the government.

somethingcorporate

I hate paying 49%+ marginal rate, it is most noticeable come bonus month but c'est la vie - we all have to pay tax. I have benefited from my education so am thankful and don't really mind having to pay back my loan. I will have paid off my loan in the next couple of years so it will not be forever, especially when making £3-4k of repayments a year.

I do feel sorry for the people in the "butter zone" of earning enough to make repayments but never enough to clear their loan - then it really will be a permanent tax.

RoseV

Apples2 wrote: »

The Taxman takes my money without even allowing me the courtesy to even look at the green stuff.

At least RoseV has already had, and spent the money once, but now feels aggrieved she can't spend it again.

Maybe the whole concept of repayment is too much.

Don't know what you mean?? I have never had a student loan, just thinking about my son and his future.

And why so aggressive?

CLAPTON

strange how no-one sees NI as a tax ?

the government increased the rate from 11% to 12% and no-one even remembers that;
if they had increased tax from 20% to 21% I'm sure we would get daily reminders