at what earnings level do people 'break even' with tax?
Discussion
This conversation is not meant as a social commentary, more an idle musing as to what point someone could reasonably lay claim to be a financial net contributor to society (to stress, i accept the many many ways that people contribute greatly to society in non-financial terms, but that is not this conversation)
to kick the conversation off, some basic numbers:
uk tax revenues (minus employers NI and other business taxes) is roughly £666bn pa - spending is obviously some way north of this, but that isn't the individuals' issue.
working age people 45m (this number includes the unemployed)
comes down to a really rough average of £14,800 in tax receipts per person per annum to pay ones way in society, from income and indirect taxes. this will cover (amongst other things) the individual's own education, old age pension, in work benefits and other 'averaged' draws on society.
i'd be interested to understand what level of earnings someone would need to achieve in order to pay this level of taxation per annum through a typical basket of vat/duty/income taxes etc.
to kick the conversation off, some basic numbers:
uk tax revenues (minus employers NI and other business taxes) is roughly £666bn pa - spending is obviously some way north of this, but that isn't the individuals' issue.
working age people 45m (this number includes the unemployed)
comes down to a really rough average of £14,800 in tax receipts per person per annum to pay ones way in society, from income and indirect taxes. this will cover (amongst other things) the individual's own education, old age pension, in work benefits and other 'averaged' draws on society.
i'd be interested to understand what level of earnings someone would need to achieve in order to pay this level of taxation per annum through a typical basket of vat/duty/income taxes etc.
Depends on how you do the sums I suppose.
Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
A salary of c. £40k would see you pay tax and NIC of c. £10k (very rough fag-packet calc).
Add-in the Council Tax you pay (say £1,500?)...
...which then leaves the amount of VAT you pay on purchases. £3,500 of VAT per year would equate to disposable income (after rent, bills, car loans) of £17,500, which is probably too high for someone on a £40k salary.
Do the same equation at £50k (~£13k of tax and NIC) and you'll overshoot your c.£15k target handsomely.
So the answer is somewhere between £40k and £50k.
But if I can also challenge the question - just because you're paying less than the average tax take doesn't mean you're not a net contributor - you may not consume 'state' services as much as your neighbour. (Ignoring the impact of pension costs for now, which you will hopefully enjoy in future...)
Add-in the Council Tax you pay (say £1,500?)...
...which then leaves the amount of VAT you pay on purchases. £3,500 of VAT per year would equate to disposable income (after rent, bills, car loans) of £17,500, which is probably too high for someone on a £40k salary.
Do the same equation at £50k (~£13k of tax and NIC) and you'll overshoot your c.£15k target handsomely.
So the answer is somewhere between £40k and £50k.
But if I can also challenge the question - just because you're paying less than the average tax take doesn't mean you're not a net contributor - you may not consume 'state' services as much as your neighbour. (Ignoring the impact of pension costs for now, which you will hopefully enjoy in future...)
so my point would be:
would someone on, for example, £40k pay enough tax to be a net contributor, with the tax, NI, duty, VAT etc that they would pay out at that level?
eta, net tax for £40k is £30,300. so £10k in income tax paid, what other taxes would someone pay out of a typical pot like that?
half a council tax, say £750,
£600 vat per year on a leased car
couple of hundred quid on booze tax
what else?
would someone on, for example, £40k pay enough tax to be a net contributor, with the tax, NI, duty, VAT etc that they would pay out at that level?
eta, net tax for £40k is £30,300. so £10k in income tax paid, what other taxes would someone pay out of a typical pot like that?
half a council tax, say £750,
£600 vat per year on a leased car
couple of hundred quid on booze tax
what else?
Edited by Greg_D on Thursday 3rd May 13:51
£45k is 85th percentile earnings..........
source:
https://www.gov.uk/government/statistics/percentil...
a sobering thought about why the country is forever in deficit. and kind of my hunch...
and momentum want to hammer the rich.....
source:
https://www.gov.uk/government/statistics/percentil...
a sobering thought about why the country is forever in deficit. and kind of my hunch...
and momentum want to hammer the rich.....
The UK government will spend around £800bn in 2018. Income Tax makes up about 30% of Govt revenue, so needs to raise roughly £270bn. Divide this by the 35m working people comes to just over £7,500 per person.
This means you'd need a gross salary of £48,000 to make a net contribution in Income Tax.
Of course, there are other taxes, but it is roughly proportional. Similarly, you could extend the calculation to cover people who don't work, but that would give an unrealistic picture in my opinion.
So £48,000.
This means you'd need a gross salary of £48,000 to make a net contribution in Income Tax.
Of course, there are other taxes, but it is roughly proportional. Similarly, you could extend the calculation to cover people who don't work, but that would give an unrealistic picture in my opinion.
So £48,000.
CzechItOut said:
The UK government will spend around £800bn in 2018. Income Tax makes up about 30% of Govt revenue, so needs to raise roughly £270bn. Divide this by the 35m working people comes to just over £7,500 per person.
This means you'd need a gross salary of £48,000 to make a net contribution in Income Tax.
Of course, there are other taxes, but it is roughly proportional. Similarly, you could extend the calculation to cover people who don't work, but that would give an unrealistic picture in my opinion.
So £48,000.
Not sure I understand your maths. Are you saying someone who earns £48k p.a. only pays £7.5k in income tax? I don't earn that much and I'm bloody sure I'm paying more than £7.5k tax.This means you'd need a gross salary of £48,000 to make a net contribution in Income Tax.
Of course, there are other taxes, but it is roughly proportional. Similarly, you could extend the calculation to cover people who don't work, but that would give an unrealistic picture in my opinion.
So £48,000.
Greg_D said:
so my point would be:
would someone on, for example, £40k pay enough tax to be a net contributor, with the tax, NI, duty, VAT etc that they would pay out at that level?
eta, net tax for £40k is £30,300. so £10k in income tax paid, what other taxes would someone pay out of a typical pot like that?
half a council tax, say £750,
£600 vat per year on a leased car
couple of hundred quid on booze tax
what else?
the 20% VAT on all general shopping and purchases?would someone on, for example, £40k pay enough tax to be a net contributor, with the tax, NI, duty, VAT etc that they would pay out at that level?
eta, net tax for £40k is £30,300. so £10k in income tax paid, what other taxes would someone pay out of a typical pot like that?
half a council tax, say £750,
£600 vat per year on a leased car
couple of hundred quid on booze tax
what else?
lower rates of VAT on energy bills
IPT on insurance
Vocal Minority said:
Depends on how you do the sums I suppose.
Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
don't forget to pay forward for your state pension, you've probably got some way to go yet, lol.....Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
DIW35 said:
Not sure I understand your maths. Are you saying someone who earns £48k p.a. only pays £7.5k in income tax? I don't earn that much and I'm bloody sure I'm paying more than £7.5k tax.
£11,850 at 0%£34,500 at 20% = £6,900
£1,650 at 40% = £660
Total gross £48,000, total Income Tax £7,560
Are you including National Insurance in your tax?
Greg_D said:
Vocal Minority said:
Depends on how you do the sums I suppose.
Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
don't forget to pay forward for your state pension, you've probably got some way to go yet, lol.....Do you just do it on a simple expenditure per capita vs income and tax - or do you think about it on a 'whole life' basis.
I did this sum with my partner recently and if you include everything from your birth, all your free dentist stuff, any tax credits your folks got, in my case my state education, the leg i broke playing rugby that time, the fact that my tuition at university was still heavily subsidized when I was there, the opportunity cost of my student loan...all that sort of thing....
We reckon it's only been very recently I can be classed as a net contributor.
It's a long old slog to get there, I reckon.
I am not 100% banking on getting it
How does a public sector factor in this.
Given the public sector wages are paid out of taxation - then it could be argued that if you work in the public sector - you can't ever be a net contributor, since all you are doing is paying back part of the tax used to pay your salary.
Also - much of the revenue generated by private sector companies comes from the public sector, so in theory you'd have to adjust private sector corporation tax take to account for this as well.
Given the public sector wages are paid out of taxation - then it could be argued that if you work in the public sector - you can't ever be a net contributor, since all you are doing is paying back part of the tax used to pay your salary.
Also - much of the revenue generated by private sector companies comes from the public sector, so in theory you'd have to adjust private sector corporation tax take to account for this as well.
Moonhawk said:
How does a public sector factor in this.
Given the public sector wages are paid out of taxation - then it could be argued that if you work in the public sector - you can't ever be a net contributor, since all you are doing is paying back part of the tax used to pay your salary.
Also - much of the revenue generated by private sector companies comes from the public sector, so in theory you'd have to adjust private sector corporation tax take to account for this as well.
Depends on the equivalent value of the work undertaken....Given the public sector wages are paid out of taxation - then it could be argued that if you work in the public sector - you can't ever be a net contributor, since all you are doing is paying back part of the tax used to pay your salary.
Also - much of the revenue generated by private sector companies comes from the public sector, so in theory you'd have to adjust private sector corporation tax take to account for this as well.
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