Is High Taxation influencing your retirement date or plans?

Datchet

I know I’m fortunate, but the income tax rates / bands and fiscal drag have actually pushed me to reduce days a week and abandon higher bonuses; as it’s simply not worth it. This will be compounded if pension tax relief is messed with.
Example; Does anyone remember the senior Doctors & Consultants refusing additional hours / workload as all of the extra income would be at the additional rate and they were at Salary Sacrifice Limits?
The then government then hiked the Pension allowance to compensate.

It’s annoying, as I am (still) healthy, have tons of energy, great opportunities to exploit and work to win! But in the current tax environment, it’s not worth my while… I’ve gone 4 days a week, have stepped back from lucrative initiatives that would have benefited my firm, colleagues ( and, ironically, THE HMRC!!) and handing over work to next gen.

Anyone else?

Alnat1

Forget about the financial side of things and simply ask yourself - am I happy?

If yes, carry on doing what you are now.

If not, think about what would need to change to make you content with life.

It's only really complicated if money is what makes you happy. 

NorthYorkie

There's an old saying in the tax advisory profession; "Don't let the tax tail wag the commercial dog". Which, in your particular case means don't cut your income solely to reduce your tax bill. This is a pretty dumb idea anyway; whilst ever the tax rate is less than 100% you will always be better off financially. Sometimes it's better to pay the tax.

However, if there are other, personal reasons why you would prefer to work less, then that's a different scenario entirely. As Alnat1 says above, do what makes you happy.

Datchet

Thanks for comments - mostly - wise words. The point I was making is the huge effort I put in to sustain and grow the business results in marginal or incrementally reduced gains. 

Albermarle

Datchet said:

Thanks for comments - mostly - wise words. The point I was making is the huge effort I put in to sustain and grow the business results in marginal or incrementally reduced gains. 

I believe it is called a progressive tax system, where the more you earn the higher % you pay in taxes. Whilst very low earners pay no/little tax at all. 

QrizB

Datchet said:

Thanks for comments - mostly - wise words. The point I was making is the huge effort I put in to sustain and grow the business results in marginal or incrementally reduced gains. 

Sounds as though you'd be justified on putting in less effort, then.

And no, taxation is not directly influencing my retirement plans.

(There might've been some indirect influence, since saving into my pension is more attractive than paying higher-rate tax on earnings and my pension pot might be larger today than it would've been had I taken income instead and spent it. But considering that I've saved a moderate pot in ISAs too, lower income tax might simply have changed the split of my financial assets rather than reducing them.)

SouthCoastBoy

I recently turned down a promotion. They wanted me to lead a team and were going to give me a 5k payrise, I pay 40% tax I decided it wasn't worth it. I requested 10k but they refused.

Having said that I could have kept it all by putting in my pension, but still didn't think it was worth it, so maybe not solely tax driving that decision 

Organgrinder

Tax is a complicated matter. Many things inform our views on it. Much depends I would suggest on your views on how we pay for things that benefit society. 

In any event our tax system is largely misunderstood. We have income tax. We have national insurance. Etc.

Now if you earn £30k and get offered a £10k rise. Great. You get to keep £8k of it. Except no you don't because of national insurance. You get to keep £7,200 of it. An effective rate of 28%.

If you earn £60k and get offered a £10k rise you get to keep £5,800 of it. A 42% effective rate. 

Now let's assume you divert all of the increase into a pension fund.

The lower earner still pays £800 in NI (8%). The higher earner pays only £200 in NI (2%).

As a way of saving money, pension funds (currently) are a very cost effective way of managing your tax bill.

Vitor

The Laffer Curve shows that beyond a certain point, higher tax rates reduce the incentive to work because people keep less of each extra pound. If overtime or promotion leaves only pennies after tax, many will work less, avoid, or hide income, so government revenue will actually fall. It's an open question on whether the current govt. has pushed taxation well into the region of declining revenue.