How much more tax?

Jeremy535897

calcotti said:

Jeremy535897 said:

I agree it is pointless, although actually tax rates and allowances increase by CPI each year by virtue of section 21 ITA 2007, unless the Chancellor decides otherwise.

I wasn’t aware of that - perhaps because history indicates that the Chancellor does indeed frequently decide otherwise!

Another example of commitments given and not met. It was linked to RPI, but section 4 FA 2014 reduced it to CPI. Section 3 F(No 2)A 2015 introduced a requirement to link it to minimum wage once the personal allowance reached £12,500, but that was repealed in FA 2019.

sultan123

If I earn 95k in this tax year and there are subsequent freezes on PA in following tax years does my take home decrease?

Assumption that my salary stays at 95k

[Deleted User]

No it doesn’t. Everything will remain the same. 

mark1959

No it doesn't.

sultan123

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

sultan123

[Deleted User] said:

No it doesn’t. Everything will remain the same. 

thanks, what if it goes to 100k salary

Dazed_and_C0nfused

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

sultan123

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

Dazed_and_C0nfused

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

No, it's for vast majority of people who do get a pay rise each year, however small.

If you earn £95k and get a pay rise of £5k you will pay more tax (and NI) as you have an extra £5k income.  Even if the Personal Allowance and basic rate band increased for inflation you would still pay more tax as £5k extra income would almost certainly be more than any increase in the Personal Allowance or basic rate band.

If you earn £12,000, have no other income and pay no tax but get a 10% pay rise you will start paying some tax.

[Deleted User]

sultan123 said:

Dazed_and_C0nfused said:

sultan123 said:

mark1959 said:

No it doesn't.

thanks, why does everyone keep saying freezing the PA means more people pay more tax then?

Because they're wrong.

You will pay exactly the same amount of tax.

But with inflation of 10% having wages remaining the same and tax allowances/rates/rate bands remaining the same means your take home pay has less buying power.

makes sense thank you. What if wage went up to 100k though?

What about people saying the freeze means many people get pulled into paying more tax? is this for those who earn 50k?

Fiscal drag. Let’s say that you currently earn £12000 - no tax paid as below the personal allowance. You get an inflationary pay rise of 10% increasing your salary to £13200. If the personal allowance does not also increase by 10% you will be a taxpayer. The government has received more tax by leaving the personal allowance as it is.

And so the effect increases as one goes higher up the earning scale.