60% Tax Trap and Childcare Tax Traps

eskbanker

borris78 said:

eskbanker said:

MetaPhysical said:

£50k minus taxes and NI is *not* a high income in 2024, to say nothing of the fact that 40% tax starts to kick in at that level too.

'High' is obviously subjective but those earning £50K or above represent the top 15% of taxpayers....

I see lots of comments like this and it really isn't as simple as this.
In the case of the child benefit tax, it is important to consider household income since most children live in a household with two parents/carers. £50k gross is under the median as a household income for a family. It is therefore not a high income. 
Secondly, the median household NET income for all households (with or without children) is about £33k which isn;t too far away from £50k after taxes. It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. Someone on minimum wage can have a similar net income to someone on £50k due to things like universal credit being additional to the salary. 

My point is that it's a simple fact that £50K income represents top 15% at a personal level (household income is an entirely different matter) - any debate about whether or not that's "high" is purely subjective, unless that term is defined in a meaningful way.  However, your reference to "child benefit tax" would appear to indicate a less than impartial perspective on this issue....

borris78

It isn't a subjective opinion at all. Salary is not the only form of income so talking about wages on their own is meaningless, especially in the context of this thread which is talking about children. Benefits top up incomes. Someone on minimum wage can have a similar net income to someone on £50k gross. Therefore saying someone on £50k is in the top 15% is a misleading use of statistics. Household ultimately determines how well off someone is or isn't, and a £50k gross household income is well under the median for a family. 

zagfles

eskbanker said:

borris78 said:

eskbanker said:

MetaPhysical said:

£50k minus taxes and NI is *not* a high income in 2024, to say nothing of the fact that 40% tax starts to kick in at that level too.

'High' is obviously subjective but those earning £50K or above represent the top 15% of taxpayers....

I see lots of comments like this and it really isn't as simple as this.
In the case of the child benefit tax, it is important to consider household income since most children live in a household with two parents/carers. £50k gross is under the median as a household income for a family. It is therefore not a high income. 
Secondly, the median household NET income for all households (with or without children) is about £33k which isn;t too far away from £50k after taxes. It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. Someone on minimum wage can have a similar net income to someone on £50k due to things like universal credit being additional to the salary. 

My point is that it's a simple fact that £50K income represents top 15% at a personal level (household income is an entirely different matter) - any debate about whether or not that's "high" is purely subjective, unless that term is defined in a meaningful way.  However, your reference to "child benefit tax" would appear to indicate a less than impartial perspective on this issue....

Really? Why? HMRC call it exactly that, they have a "child benefit tax calculator":
Child Benefit tax calculator - GOV.UK (www.gov.uk)

zagfles

borris78 said:

It isn't a subjective opinion at all. Salary is not the only form of income so talking about wages on their own is meaningless, especially in the context of this thread which is talking about children. Benefits top up incomes. Someone on minimum wage can have a similar net income to someone on £50k gross. Therefore saying someone on £50k is in the top 15% is a misleading use of statistics. Household ultimately determines how well off someone is or isn't, and a £50k gross household income is well under the median for a family. 

Plus the person receiving the child benefit may be in the bottom 1% of earners (if they're a stay at home parent). 

Household income is so obviously the most relevant measure of income and means for a family. That's why all means tested benefit assess on household income. £50k to support a family of 4 is £12,500 each. Where is that on the scale? 

eskbanker

zagfles said:

eskbanker said:

borris78 said:

eskbanker said:

MetaPhysical said:

£50k minus taxes and NI is *not* a high income in 2024, to say nothing of the fact that 40% tax starts to kick in at that level too.

'High' is obviously subjective but those earning £50K or above represent the top 15% of taxpayers....

I see lots of comments like this and it really isn't as simple as this.
In the case of the child benefit tax, it is important to consider household income since most children live in a household with two parents/carers. £50k gross is under the median as a household income for a family. It is therefore not a high income. 
Secondly, the median household NET income for all households (with or without children) is about £33k which isn;t too far away from £50k after taxes. It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. Someone on minimum wage can have a similar net income to someone on £50k due to things like universal credit being additional to the salary. 

My point is that it's a simple fact that £50K income represents top 15% at a personal level (household income is an entirely different matter) - any debate about whether or not that's "high" is purely subjective, unless that term is defined in a meaningful way.  However, your reference to "child benefit tax" would appear to indicate a less than impartial perspective on this issue....

Really? Why? HMRC call it exactly that, they have a "child benefit tax calculator":
Child Benefit tax calculator - GOV.UK (www.gov.uk)

HMRC can't really be relied on to use sufficiently precise language, hence all their references to 'allowances' that are actually nil rate bands, but the High Income Child Benefit Charge is really a reduction of a means-tested benefit rather than a tax in the generally accepted sense, in the same way that 'bedroom tax' entered the vernacular despite being nothing of the sort!

In terms of the wider discussion, as above the context of my original comment is clear, in that I was replying directly to someone else posting about personal, not household, income - nobody can dispute that these are different measures, hence my point about the importance of defining terms.

zagfles

eskbanker said:

zagfles said:

eskbanker said:

borris78 said:

eskbanker said:

MetaPhysical said:

£50k minus taxes and NI is *not* a high income in 2024, to say nothing of the fact that 40% tax starts to kick in at that level too.

'High' is obviously subjective but those earning £50K or above represent the top 15% of taxpayers....

I see lots of comments like this and it really isn't as simple as this.
In the case of the child benefit tax, it is important to consider household income since most children live in a household with two parents/carers. £50k gross is under the median as a household income for a family. It is therefore not a high income. 
Secondly, the median household NET income for all households (with or without children) is about £33k which isn;t too far away from £50k after taxes. It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. Someone on minimum wage can have a similar net income to someone on £50k due to things like universal credit being additional to the salary. 

My point is that it's a simple fact that £50K income represents top 15% at a personal level (household income is an entirely different matter) - any debate about whether or not that's "high" is purely subjective, unless that term is defined in a meaningful way.  However, your reference to "child benefit tax" would appear to indicate a less than impartial perspective on this issue....

Really? Why? HMRC call it exactly that, they have a "child benefit tax calculator":
Child Benefit tax calculator - GOV.UK (www.gov.uk)

HMRC can't really be relied on to use sufficiently precise language, hence all their references to 'allowances' that are actually nil rate bands, but the High Income Child Benefit Charge is really a reduction of a means-tested benefit rather than a tax in the generally accepted sense, in the same way that 'bedroom tax' entered the vernacular despite being nothing of the sort!

If you don't believe HMRC then how about the actual legislation:
Finance Act 2012 (legislation.gov.uk)

"A person (“P”) is liable to a charge to income tax for a tax year if....."

The law says it's a tax. So it's a tax. Not vernacular like the "bedroom tax" or "dementia tax" or "granny tax" and all sorts of other media inventions. But an actual tax described as tax in legislation. 

Grumpy_chap

borris78 said:

It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. 

You are entitled to your opinion a to whether £50k salary is high (or not).
HICBIC is not linked to salary, but to ANI, so takes into account all forms of income and also allows for deductibles such as pension contributions.
The point about household rather than individual income now appears to have been noted by the Establishment so we can expect that to be resolved in the relatively near future.

borris78 said:

This country have a plethora of direct and indirect taxes which puts the real rate of tax for someone on £50k close to 50%. 

I am not sure that the tax rate for someone on £50k is close to 50% unless you are considering VAT, Council Tax, etc.
At £50k, income tax is 20% rate plus NI currently 10% but £12.5k (>20%) of the total is not subject to tax.  An individual earning £50k will normally realise take home pay at around £39k so just over 20% total taxation rate.  Far below the 50% asserted.
(Different rates apply in Scotland.)  (Student loans would also impact for some.)
What were you including to get the 50% asserted?

eskbanker

zagfles said:

eskbanker said:

zagfles said:

eskbanker said:

borris78 said:

eskbanker said:

MetaPhysical said:

£50k minus taxes and NI is *not* a high income in 2024, to say nothing of the fact that 40% tax starts to kick in at that level too.

'High' is obviously subjective but those earning £50K or above represent the top 15% of taxpayers....

I see lots of comments like this and it really isn't as simple as this.
In the case of the child benefit tax, it is important to consider household income since most children live in a household with two parents/carers. £50k gross is under the median as a household income for a family. It is therefore not a high income. 
Secondly, the median household NET income for all households (with or without children) is about £33k which isn;t too far away from £50k after taxes. It is therefore absurd to say a £50k salary is high. As a salary it is higher than average but salaries are not the only form of income AND it is ultimately household income that matters especially for families. Someone on minimum wage can have a similar net income to someone on £50k due to things like universal credit being additional to the salary. 

My point is that it's a simple fact that £50K income represents top 15% at a personal level (household income is an entirely different matter) - any debate about whether or not that's "high" is purely subjective, unless that term is defined in a meaningful way.  However, your reference to "child benefit tax" would appear to indicate a less than impartial perspective on this issue....

Really? Why? HMRC call it exactly that, they have a "child benefit tax calculator":
Child Benefit tax calculator - GOV.UK (www.gov.uk)

HMRC can't really be relied on to use sufficiently precise language, hence all their references to 'allowances' that are actually nil rate bands, but the High Income Child Benefit Charge is really a reduction of a means-tested benefit rather than a tax in the generally accepted sense, in the same way that 'bedroom tax' entered the vernacular despite being nothing of the sort!

If you don't believe HMRC then how about the actual legislation:
Finance Act 2012 (legislation.gov.uk)

"A person (“P”) is liable to a charge to income tax for a tax year if....."

The law says it's a tax. So it's a tax. Not vernacular like the "bedroom tax" or "dementia tax" or "granny tax" and all sorts of other media inventions. But an actual tax described as tax in legislation. 

OK, fair enough, looks like I need to concede that point then!  It still seems analogous to the 'bedroom tax' scenario, in terms of a means-tested adjustment to a benefit, but that's not really directly relevant, especially when I was posting about the importance of precise terminology!

MetaPhysical

The very high marginal rates disincentivise work and the chancellor knowingly ignored this issue and kicked the can down the road.  I have turned down further hours and a starting a four day week shortly.  That means as a professionally trained person (I know there are many of us on this forum) I am not contributing as much to the economy as I could be doing, and the government wants, due to the bonkers UK income tax system and its perverse thresholds and tapers.

borris78

Grumpy_chap said:

borris78 said:

This country have a plethora of direct and indirect taxes which puts the real rate of tax for someone on £50k close to 50%. 

I am not sure that the tax rate for someone on £50k is close to 50% unless you are considering VAT, Council Tax, etc.

Yes as I said, direct and indirect taxes which includes council tax, VAT, energy taxes, insurances taxes etc. Plus any pay rise above £50k previously (now £60k) would have a marginal rate of tax of over 60% for someone in receipt of child benefit.