Debate House Prices
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How to increase the 20% tax band dramatically
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caronoel
Posts: 908 Forumite
The tax base for National Insurance is just too narrow.
The 20% tax band could be increased hugely, thereby giving a massive boost to the "squeezed middle", through these measures:
1) Apply National Insurance to income post State Pension Age. This is particularly important from an intergenerational viewpoint. As the population ages, so the cost of pensions and health care will be increasingly borne by the working age populace, unless we share the pain with those who benefit from it
2) Apply Employee National Insurance to dividends, rental income and interest to rebalance the tax disadvantages from those with mainly PAYE income. In particular dividends for "contractors" are often a very clever tax wheeze
3) Raise CGT rates to an individual taxpayer's marginal PAYE rate. No reason why capital gains should be taxed more lightly than income.
4) Limit the level of tax relief on charitable donations to the first £1,000, and/or limit the ability of those paying tax at 40% or 45% to claim back additional taxes.
The 20% tax band could be increased hugely, thereby giving a massive boost to the "squeezed middle", through these measures:
1) Apply National Insurance to income post State Pension Age. This is particularly important from an intergenerational viewpoint. As the population ages, so the cost of pensions and health care will be increasingly borne by the working age populace, unless we share the pain with those who benefit from it
2) Apply Employee National Insurance to dividends, rental income and interest to rebalance the tax disadvantages from those with mainly PAYE income. In particular dividends for "contractors" are often a very clever tax wheeze
3) Raise CGT rates to an individual taxpayer's marginal PAYE rate. No reason why capital gains should be taxed more lightly than income.
4) Limit the level of tax relief on charitable donations to the first £1,000, and/or limit the ability of those paying tax at 40% or 45% to claim back additional taxes.
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Comments
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3) Raise CGT rates to an individual taxpayer's marginal PAYE rate. No reason why capital gains should be taxed more lightly than income.
That would be OK if you only taxed 'real term' gains, but gains are taxed ignoring inflation. Say someone had invested in a ftse 100 tracker in 1999 and was selling it right now. If they had invested enough, they would have to pay CGT. Yet when inflation is taken into account (like it used to be with indexation allowance) there is a substantial loss. It was ridiculous to abolish the indexation allowance (it was all done in the same of simplification, presumably for simpletons). When we did have it, CGT was paid at your marginal rate of income tax, and as you suggest there was nothing wrong with doing so, completely fair.Chuck Norris can kill two stones with one birdThe only time Chuck Norris was wrong was when he thought he had made a mistakeChuck Norris puts the "laughter" in "manslaughter".I've started running again, after several injuries had forced me to stop0 -
chucknorris wrote: »That would be OK if you only taxed 'real term' gains, but gains are taxed ignoring inflation. Say someone had invested in a ftse 100 tracker in 1999 and was selling it right now. If they had invested enough, they would have to pay CGT. Yet when inflation is taken into account (like it used to be with indexation allowance) there is a substantial loss. It was ridiculous to abolish the indexation allowance (it was all done in the same of simplification, presumably for simpletons). When we did have it, CGT was paid at your marginal rate of income tax, and as you suggest there was nothing wrong with doing so, completely fair.
I was about to say exactly the same thing. There is also a question of whether capital gains should be allowed to be spread over the period the asset was hold so that there is not an artificial encouragement to sell and rebuy assets every year.
Do this right and we could also remove PPR CGT relief at the same time.
I actually like the OPS suggestion as it could lead to a huge simplification of the tax code as then there would be no need to differentiate the different types of tax and NI and thus no incentive for accounting schemes that turn one form of income into another for tax purposes.
The downside is that some people would been very badly hit and it is a bit unfair on those who have organised their affair sin one way to meet a particular set of rules to suddenly be hugely penalised by a rule change.I think....0 -
...The downside is that some people would been very badly hit and it is a bit unfair on those who have organised their affair sin one way to meet a particular set of rules to suddenly be hugely penalised by a rule change.
A very fair comment, but not a reason to avoid the change.
Like the changes to BTL, any change could be introduced over a period of up to 5 years to allow people time to structure their affairs.0 -
A very fair comment, but not a reason to avoid the change.
Like the changes to BTL, any change could be introduced over a period of up to 5 years to allow people time to structure their affairs.
Are there any taxes on yourself you are prepared to see increased, or is it only other people's money you think should be taken away?0 -
westernpromise wrote: »Are there any taxes on yourself you are prepared to see increased, or is it only other people's money you think should be taken away?
I thought the OP was suggesting doing this in a tax neutral way, just tryign to make sure that some people didn't pay less tax because they organised their income as capital gains or dividends or are currently paying les stax just because they are older and retired.I think....0 -
I thought the OP was suggesting doing this in a tax neutral way, just tryign to make sure that some people didn't pay less tax because they organised their income as capital gains or dividends or are currently paying les stax just because they are older and retired.
If it's tax neutral overall, but brings new people into the tax net, then it entails tax cuts for some paid for by tax rises upon others. The keenest enthusiasts for such "adjustments" always turn out to be those who expect to gain free money personally, or who would like others whom they envy to be the one swho experience the tax rise.
Very conveniently, these people's deeply moral and keen sense of fairness always turns out to coincide exactly with what suits their own economic interest. Rarely do you get these high-minded types proposing to pay more tax themselves in the interests of fairness. Fairness always seems to entail other people paying up so that they themselves can benefit. Funny, that.0 -
The tax base for National Insurance is just too narrow.
Scrap national insurance. Simplify tax legislation.
Give everybody a living personal allowance of say £15k.
Then tax income per se at steadily increasing levels.
Would mean that many benefit payments could be scrapped. Saving an enormous amount of money that is spent administering them.0 -
Thrugelmir wrote: »Scrap national insurance. Simplify tax legislation.
Give everybody a living personal allowance of say £15k.
Then tax income per se at steadily increasing levels.
Would mean that many benefit payments could be scrapped. Saving an enormous amount of money that is spent administering them.
That is a very good idea.
So long as the tax does not increase too much at the higher levels - after all we still need the people that are capable of earning big money as they often run the companies that pay everyone.What is this life if, full of care, we have no time to stand and stare0 -
Enterprise_1701C wrote: »we still need the people that are capable of earning big money as they often run the companies that pay everyone.
No one deserves £10 million a year as an executive. When people at the bottom scrape by on minmum wage and zero hour contracts. As takes everyone involved to create a successful organisation. Like a clock. Every part needs to work seamlessly in sync. I'm very much for the Austrian line of thinking. Where an exec's pay is capped at 20 times the bottom earners pay in a company.0 -
The tax base for National Insurance is just too narrow.
The 20% tax band could be increased hugely, thereby giving a massive boost to the "squeezed middle", ...
There is no 20% tax band for NI. You are confusing NI and IT.
Health and social care are basically funded from general taxation....
1) Apply National Insurance to income post State Pension Age. This is particularly important from an intergenerational viewpoint. As the population ages, so the cost of pensions and health care will be increasingly borne by the working age populace, unless we share the pain with those who benefit from it
2) Apply Employee National Insurance to dividends, rental income and interest to rebalance the tax disadvantages from those with mainly PAYE income. In particular dividends for "contractors" are often a very clever tax wheeze
3) Raise CGT rates to an individual taxpayer's marginal PAYE rate. No reason why capital gains should be taxed more lightly than income.
Given that the UK's fundamental problem is low savings, low investment, and low productivity, increasing taxes on savings is only going to make things worse.
And if people don't save for retirement won't that increase the demands on the public purse?
If you need to raise serious money, you need to raise IT rates. Trying to dodge the issue by proposing some magic solution that means somebody else will pay does not really work.0
This discussion has been closed.
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