Oh yeah - I was looking at the rate after the personal allowance which is tax free. I thought 37k was a bit low!
Off Topic Politics Thread
- Thread starter ChilcoSaint
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10 years ago £50k wasn’t low. Nowadays so many have drifted into the higher bracket. I’m not saying £50k is low income, but a one earner family with 2 kids and a say sole £60k income isn’t ‘rich’ anymore.
I think people need to be tax educated. The 40% tax rate is on £50,271-£125,140. On a yearly salary of £50,500, you would pay:
0% tax on £12,570.
20% on £37,700
40% on £229.
I don't think you are being harshly punished...
Yeah, I don't think the tax thresholds are that unreasonable now I'm reading it properly!
garysfc
Well-Known Member
Yep, astounds me so many people don’t know how tax & thresholds work.
I have heard about people worried about accepting pay rises as they think they will have less money. It is a dangerous myth.
However, if you are on the threshold and you get a pay rise, then it isn’t as attractive as it looks initially. However, you will be better off, just not as much as you thought.
garysfc
Well-Known Member
Agree with you both & that’s why tax education is key. There are some really nutty concepts out there.
The key point is you will be better off. Someone on 60,000 is considerably better off than someone on 50000.
60,000: 45,361 take home pay. Not too shabby!
50,000: 39,521 take home.
So, you are £6000 better off.
Assuming 40 hours per week, 48 weeks per year (1824 hours of work):
60,000: Just under £33 per hour
50,000: Just over £27 per hour
Whatever happens, you get more and more money.
This can be true if you are losing a child benefit or similar which is a cliff edge all of nothing and also on the gap between 100k and 125k where you would pay income tax of 60% and NI of 2%. The £100k cliff edge you lose childcare and also only take home 38% of your salary for that threshold.
it’s a very strange quirk.
A small but useful to know issue is that if your income takes you above the 50271 threshold you can only 'earn' interest of £500 rather than £1000 before tax kicks in on traditional type savings. ISAs of course pay tax interest free but restrict your investment.
I agree, just not as much as you may have thought. I’m all for the progressive tax rate, but I think the thresholds should have gone up - maybe not the 40% band as much, but the 0 rate definitely. This way those on low incomes can keep more. Once you earn over £125k you have no personal allowance so it doesn’t help the more wealthier
I think politicians rely on people not really understanding incremental tax rates. And I would expect a majority of the country don’t. Especially with how they are reported
Just like how I expect lots of people did not really understand that the freeze in tax thresholds meant an effective tax increase - under the Tories. But since there were not reports of the bands being actively lowered or the percentages increased a large chunk of people in the country shuffle along without realising what is going on. This isn’t aimed at posters on here either. I would expect many people who don’t even meet the threshold of political engagement to post online about it in at least somewhat thought out way (so Twitter doesn’t count) won’t have really though about such things
Just like how I expect lots of people did not really understand that the freeze in tax thresholds meant an effective tax increase - under the Tories. But since there were not reports of the bands being actively lowered or the percentages increased a large chunk of people in the country shuffle along without realising what is going on. This isn’t aimed at posters on here either. I would expect many people who don’t even meet the threshold of political engagement to post online about it in at least somewhat thought out way (so Twitter doesn’t count) won’t have really though about such things
I have a huge amount of sympathy for top end earners, as you can obviously tell...
I do get it. It’s all relative, of course. But £100k is the equivalent of £70k when these thresholds were set. Historically this would be the mid-high earners. In London, very much not high!
I don't think you'll find much sympathy for people on that sort of salary and to be honest, most people on that sort of salary are savvy enough to work around it. I think you can do something like increase your pension contributions and keep your taxable salary below the threshold.
You can. You can also increase charitable contributions where there is gift aid.
But people would still prefer to have access to that money now which they work hard for, during a cost of living crisis. The thresholds should have moved over time, with inflation.
When you are earning roughly 4x the average salary of a nurse, are you working 4 times as hard as she is?
I get your sentiment, but we know it doesn’t work like that. If so footballers would be the hardest working people on the planet!
Why would salary be based on effort rather than skill?
Should a factory worker receive the same wage as a doctor if they put similar effort in?