UK Heading For Deflation?

Graham_Devon

michaels wrote: »

Sadly similar here, our biggest customer has not agreed to an increase in rates for 3 years (indeed often there are those willing to undercut our rates) so even a cpi increase means the company has to accept a squeezing of margins as we can't be billabel more than 100% of the time excluding the national minimum number of leave days so it looks like a 0.3% annual increase is on the cards for me this month....then again my takehome is capped by the child benefit theshold so it is only my pension contributions that will suffer.

Why would your take home pay be "capped" by the child benefit threshold?

lisyloo

Why would your take home pay be "capped" by the child benefit threshold?

I'm guessing this is a self-imposed cap implemented via salary sacrifice to pension.

I do this to avoid higher rate tax, others may deliberately lower their salary to avoid losing benefits.

michaels

Graham_Devon wrote: »

Why would your take home pay be "capped" by the child benefit threshold?

Believe it or not a marginal tax rate of 67% is a disincentive to work more....and I know rates are much higher for those on lower incomes espeically if you are eligible for housing benefit. If I were on minimum wage doing 24 hours a week the 95%+ effective tax rate would definitely be a disincentive to work more hours.

Thrugelmir

michaels wrote: »

Believe it or not a marginal tax rate of 67% is a disincentive to work more....and I know rates are much higher for those on lower incomes espeically if you are eligible for housing benefit. If I were on minimum wage doing 24 hours a week the 95%+ effective tax rate would definitely be a disincentive to work more hours.

You'd better hope that Labour aren't elected then. As I would think that an increase in income tax or national insurance is highly probable. As there plans will have to be funded.

michaels

Certainly won't be anything as honest as income tax. My guess would be that the bit of NI over the upper earings limit will be increased or perhaps the UEL removed altogether? Perhaps it could be called an 'NHS levy'? Tax relief on pension contributions could also be capped at basic rate.

lisyloo

Tax relief on pension contributions could also be capped at basic rate.

How does that work for salary sacrifice where you never receive the income so never pay tax?

antrobus

lisyloo wrote: »

How does that work for salary sacrifice where you never receive the income so never pay tax?

Shhhh. Don't say that, you'll let the cat out of the bag.:)

Somebody will then work out that the way around it is to switch to a pension with employer only contributions. Someone else will say something about a benefit-in-kind charge, and then all those public sector workers with employer contribution rates of 15%-25% will realise that they're stuffed.

wotsthat

Graham_Devon wrote: »

Why would your take home pay be "capped" by the child benefit threshold?

I cap my income so I still get child benefit.

This years pay rise is going to make it nigh on impossible to make sufficient pension contributions to receive the full amount.

:mad::mad: