Autumn Statement 2016

[sidicks]

Welshbeef said:

So as usual no one then comments on the £100-122k and the 150-200k territory with crazy marginal rates. They understand the issue but think your alright jack.

Point is it's not fair not logical and rewards higher earners.

Assume no one willl respond as is the norm on this issue.

The current income tax system is nonsense at both ends of the earnings spectrum.

[tighnamara]

Welshbeef said:

Exactly

Say £20 0% thereafter x% job done

Your worse than the Tory government - £20 at 0% tax.

Presume you mean £20,000 at 0%.
So what thereafter at your X% - 20% / 40% /60% ?

[Welshbeef]

tighnamara said:

Welshbeef said:

Exactly

Say £20 0% thereafter x% job done

Your worse than the Tory government - £20 at 0% tax.

Presume you mean £20,000 at 0%.
So what thereafter at your X% - 20% / 40% /60% ?

Whatever is required to directly replace the revenue HMRC currently take in

Then you can modulate 2 things
1. Starting point of the flat rate
2. The % rate.

[Welshbeef]

sidicks said:

Welshbeef said:

So as usual no one then comments on the £100-122k and the 150-200k territory with crazy marginal rates. They understand the issue but think your alright jack.

Point is it's not fair not logical and rewards higher earners.

Assume no one willl respond as is the norm on this issue.

The current income tax system is nonsense at both ends of the earnings spectrum.

For some individuals the £1 to take you from £59,999 to £60,000 is an exceptionally high % / probably over 100% as you lose the child benefit.

My example of a payrise and job move from Reading to London £100k to £122k highlights the utter insanity of the way taper removal of income tax free threshold skewers people.
Salary sacrifice is going to hurt.

[Eric Mc]

Aye - and it will cause problems for things like Child Benefit.

[Welshbeef]

To me a benefit should be there for all.

Child benefit
Tax free threshold
Pension annual allowances

And so many people who have opted out of receiving child benefit as the sole house worker earns over £60k yet don't realise they have to still apply for a zero child benefit payment so that Homemaker Mrs doesn't lose out on up to 12 years NI credit contributions per child. That could hammer so many who simply don't realise / it's not that well known.

If tax revenue isn't enough to pay for these things increase income tax or decrease the tax free starting point to net off. Or simply cut the benefit entirely - the waste of money administering it is insane loads of people benefit when they shouldn't be it deliberate or by chance.

[sidicks]

tighnamara said:

Your worse than the Tory government - £20 at 0% tax.

Presume you mean £20,000 at 0%.

It was pretty obvious that £20k was what he meant. If you are going to (sarcastically) correct someone's typo then you should ensure you don't include any of your own!

Did you mean "you're"...?!

tighnamara said:

So what thereafter at your X% - 20% / 40% /60% ?

Whatever is needed to achieve the same overall tax outcome, that would seem appropriate?!

[Welshbeef]

tighnamara said:

Welshbeef said:

Exactly

Say £20 0% thereafter x% job done

Your worse than the Tory government - £20 at 0% tax.

Presume you mean £20,000 at 0%.
So what thereafter at your X% - 20% / 40% /60% ?

So looking at the March2016 budget it gives a breakdown of the tax income.

Income tax £170b
National ins £113b
Vat £131b
Etc

Let's stick to Income tax.
Let's assume we have £31m working people.
As such each employee pays in £5484

Tax free level is £11k
Average UK salary is £26k
As such if everyone earned the average salary they would be paying £5,484 on the £15k of taxable income (£26-£11) so an absolute tax rate of 21%, but more importantly a marginal rate of 36.6%.

Change the maths with a £20k starting point.
You'd need to pay £5,484 tax
Average sal £26k
Effective rate is the same clearly 21%
However marginal rate would be an eye watering 91.4%.

But what that crude calculation does is utterly ignore the median, that said it's a starter for 10. Clearly doable but you'd get to the point of why would I work so much harder for £43pcm etc.

[paulrockliffe]

Why don't they just draw a pretty curve of income against tax rate, work out the equation of the line and then use that equation to work out how much tax you should be paying?

Same equation (or different if preferred) applied to all benefits that are means tested.

There would be no cliff edges and associated unfairness.

The system would be incredibly simple to administer.

The system would tend towards a simple formula and discourage political tinkering as there are no headline rates and thresholds to use to argue how bad the others are. Increases in taxation are easy to spot by integrating the formulas.

[Welshbeef]

paulrockliffe said:

Why don't they just draw a pretty curve of income against tax rate, work out the equation of the line and then use that equation to work out how much tax you should be paying?

Same equation (or different if preferred) applied to all benefits that are means tested.

There would be no cliff edges and associated unfairness.

The system would be incredibly simple to administer.

The system would tend towards a simple formula and discourage political tinkering as there are no headline rates and thresholds to use to argue how bad the others are. Increases in taxation are easy to spot by integrating the formulas.

Agreed.
Problem is to eliminate the crazy issues it contains you would literally be giving tax cuts to millionaires along with everyone who is impacted with the oddity.
So removing it is politically problematic. Ditto winter fuel allowance

Then you are an easy target - giving vast tax cuts to the wealthy and increasing taxes for the poor.
The only way to get around it is to grow wages above and beyond it ie the living wage @£9.20/hour gets rid Elon working tax credits entirely. But the starting point of these higher value impacts would take decades to inflate away.
Maybe as more get hit by it or lobby the govt about it not being inflated ie fiscal drag could help.

Remember the £100-122k issue used to be less IT was a £100-112k issue but as the tax free threshold has increased so does this taper.
You could have a situation whereby this taper extends into the 150-200k range at which point you'd literally be paying the govt for the salary you earned until you'd cleared the income tax free threshold.