Discussion
It would have been totally unheard of 20 years ago for someone in a regular job (say a Nurse) to even contemplate higher rate tax.
Not only that but instead of being paid to undertake a Diploma they now have to pay to do a degree and pay the SLC for their whole working life.
It's almost unfathomable how much worse it's got.
I'd suggest the LTA and TFLS isn't high on many people's fiscal drag concerns.
I'm assuming it'll still be the same in 17 years when I claim mine.
Not only that but instead of being paid to undertake a Diploma they now have to pay to do a degree and pay the SLC for their whole working life.
It's almost unfathomable how much worse it's got.
I'd suggest the LTA and TFLS isn't high on many people's fiscal drag concerns.
I'm assuming it'll still be the same in 17 years when I claim mine.
One thing in favour of fiscal drag: It applies negative feedback to the economy. That means when the economy is changing in some particular way, fiscal drag tends to push back against that change rather than reinforce it. It's like having your car set up so that the steering is "self-centring" rather than having it try to snap violently to the left or right as soon as you give any steering input.
If the economy starts to grow, fiscal drag naturally puts the breaks on slightly. This helps stop economic demand from outstripping the economy's capacity to increase production. If demand were allowed to outstrip supply, all that can happen is for prices to rise until they suppress the demand, and that turns out to be exceptionally damaging.
In this sense fiscal drag is just another way of saying "progressive tax rates" and is just a useful way of encouraging economic stability. You set the rules of the game to make the game stable.
Another thing in favour of fiscal drag. If you have a period of sustained moderate inflation, fiscal drag can be used as a way of changing the structure of your income tax rates. This is only useful if you need to re-balance who is paying income tax in your economy. The UK absolutely needs to be doing this. At the moment we have a small number of high earners paying a hell of a lot of tax and a load of middle-earners paying too little. No one wants to be told they aren't paying their way, but that is the reality.
We currently have a small number of higher earners paying Scandinavian levels of tax, middle earners paying below-average tax for a European nation and we have public services that are about average for a European nation. Most middle earners have their kids educated by the state, get health care from the state, have child care subsidised by the state. And they pay a lot of tax towards all of that. But they are paying too little. If they were in the USA they would be paying less tax, but they'd be paying a hell of a lot more for private healthcare. If they were in continental Europe, they'd be getting similar education, often better healthcare ... and they'd be paying more tax.
A relatively painless way of slowly shifting more of the tax burden down to middle earners is to allow the fiscal drag from income tax banding to slowly do the work. This is gives people lots and lots of time to adjust to the change.
Is it a good thing that the Conservatives and Labour both went into the last general election saying "no increase in income tax"? No, they were both talking absolute horses
t. Both parties know damn well that that won't work ... well, anyone in either party who can count knows that. So they were both going to hope that fiscal drag would impose the structural reform that they were incapable of selling to the general public. It's feeble that we Brits can't have an honest discussion about this.
Government does not want to raise tax. Responsible Government has got to try to balance the books. Balancing the books is the only motivation for raising taxes. Of course every government would love to be able to say "we've cut taxes!" because that is an immediate vote-winner. In reality that is almost always impossible because we want the state to provide us with continually better education, better healthcare, better defence. Not only does the absolute tax take never reduce, but when you've got an ageing population it is damn nearly inevitable that the marginal rate of tax on employees is going to have to rise as a greater percentage of their productive output has to be transferred to the elderly. Blaming this sort of thing on the government is like blaming them for a damp August.
If the economy starts to grow, fiscal drag naturally puts the breaks on slightly. This helps stop economic demand from outstripping the economy's capacity to increase production. If demand were allowed to outstrip supply, all that can happen is for prices to rise until they suppress the demand, and that turns out to be exceptionally damaging.
In this sense fiscal drag is just another way of saying "progressive tax rates" and is just a useful way of encouraging economic stability. You set the rules of the game to make the game stable.
Another thing in favour of fiscal drag. If you have a period of sustained moderate inflation, fiscal drag can be used as a way of changing the structure of your income tax rates. This is only useful if you need to re-balance who is paying income tax in your economy. The UK absolutely needs to be doing this. At the moment we have a small number of high earners paying a hell of a lot of tax and a load of middle-earners paying too little. No one wants to be told they aren't paying their way, but that is the reality.
We currently have a small number of higher earners paying Scandinavian levels of tax, middle earners paying below-average tax for a European nation and we have public services that are about average for a European nation. Most middle earners have their kids educated by the state, get health care from the state, have child care subsidised by the state. And they pay a lot of tax towards all of that. But they are paying too little. If they were in the USA they would be paying less tax, but they'd be paying a hell of a lot more for private healthcare. If they were in continental Europe, they'd be getting similar education, often better healthcare ... and they'd be paying more tax.
A relatively painless way of slowly shifting more of the tax burden down to middle earners is to allow the fiscal drag from income tax banding to slowly do the work. This is gives people lots and lots of time to adjust to the change.
Is it a good thing that the Conservatives and Labour both went into the last general election saying "no increase in income tax"? No, they were both talking absolute horses
t. Both parties know damn well that that won't work ... well, anyone in either party who can count knows that. So they were both going to hope that fiscal drag would impose the structural reform that they were incapable of selling to the general public. It's feeble that we Brits can't have an honest discussion about this.Government does not want to raise tax. Responsible Government has got to try to balance the books. Balancing the books is the only motivation for raising taxes. Of course every government would love to be able to say "we've cut taxes!" because that is an immediate vote-winner. In reality that is almost always impossible because we want the state to provide us with continually better education, better healthcare, better defence. Not only does the absolute tax take never reduce, but when you've got an ageing population it is damn nearly inevitable that the marginal rate of tax on employees is going to have to rise as a greater percentage of their productive output has to be transferred to the elderly. Blaming this sort of thing on the government is like blaming them for a damp August.
To be honest, personally I think the amount of tax the majority of people pay is actually too low.
Someone on or near the higher rate threshold has a tax rate of roughly 20% with anyone below the threshold paying even less. This seems, to me at least, incredibly fair.
It’s the abrupt cliffs and loss of various privileges that are hugely unfair and serve as massive disincentives to work harder and better yourself. The fact that by the time you hit £125k you’re paying 38% in tax is the obscene part. Even 31% at £100k seems fair.
In my view they should perhaps have a 30% band that smooths out the massive cliffs and they should certainly get rid of the utterly ridiculous tax traps like at £100k+.
Someone on or near the higher rate threshold has a tax rate of roughly 20% with anyone below the threshold paying even less. This seems, to me at least, incredibly fair.
It’s the abrupt cliffs and loss of various privileges that are hugely unfair and serve as massive disincentives to work harder and better yourself. The fact that by the time you hit £125k you’re paying 38% in tax is the obscene part. Even 31% at £100k seems fair.
In my view they should perhaps have a 30% band that smooths out the massive cliffs and they should certainly get rid of the utterly ridiculous tax traps like at £100k+.
Crumpet said:
To be honest, personally I think the amount of tax the majority of people pay is actually too low.
Someone on or near the higher rate threshold has a tax rate of roughly 20% with anyone below the threshold paying even less. This seems, to me at least, incredibly fair.
It s the abrupt cliffs and loss of various privileges that are hugely unfair and serve as massive disincentives to work harder and better yourself. The fact that by the time you hit £125k you re paying 38% in tax is the obscene part. Even 31% at £100k seems fair.
In my view they should perhaps have a 30% band that smooths out the massive cliffs and they should certainly get rid of the utterly ridiculous tax traps like at £100k+.
20 years ago I might have agreed with you. Someone on or near the higher rate threshold has a tax rate of roughly 20% with anyone below the threshold paying even less. This seems, to me at least, incredibly fair.
It s the abrupt cliffs and loss of various privileges that are hugely unfair and serve as massive disincentives to work harder and better yourself. The fact that by the time you hit £125k you re paying 38% in tax is the obscene part. Even 31% at £100k seems fair.
In my view they should perhaps have a 30% band that smooths out the massive cliffs and they should certainly get rid of the utterly ridiculous tax traps like at £100k+.
The problem is, your buying power with 125k is a fraction of what it was, due to, you guessed it, higher taxes on everything else.
Personally I don't think we should be looking at how much we are taxed, we should be looking at how much of our tax is being wasted or spent badly (same thing I guess).
Geoffcapes said:
20 years ago I might have agreed with you.
The problem is, your buying power with 125k is a fraction of what it was, due to, you guessed it, higher taxes on everything else.
Personally I don't think we should be looking at how much we are taxed, we should be looking at how much of our tax is being wasted or spent badly (same thing I guess).
Your spending power hasn't been eroded by taxation. It has been eroded by inflation. If inflation had been bang on target for those twenty years, you'd expect money to have lost a third of its purchasing power.The problem is, your buying power with 125k is a fraction of what it was, due to, you guessed it, higher taxes on everything else.
Personally I don't think we should be looking at how much we are taxed, we should be looking at how much of our tax is being wasted or spent badly (same thing I guess).
Edited by ATG on Tuesday 7th April 15:00
IJWS15 said:
Each time one of my pensions goes up I get a letter telling me how much of the LSA and LSDBA it uses.
Why don t the allowances rise with inflation?
Because the conservativez borrowed like crazy in order to avoid raising taxes. Interest on their debt increased substantially (doubled) meaning now our state pays in interest 10bn per month. Direct transfer from the many to the rich. So we have a state to run but high commitments from the past.Why don t the allowances rise with inflation?
Blue_star said:
IJWS15 said:
Each time one of my pensions goes up I get a letter telling me how much of the LSA and LSDBA it uses.
Why don t the allowances rise with inflation?
Because the conservativez borrowed like crazy in order to avoid raising taxes. Interest on their debt increased substantially (doubled) meaning now our state pays in interest 10bn per month. Direct transfer from the many to the rich. So we have a state to run but high commitments from the past.Why don t the allowances rise with inflation?
They've all done it. No point picking names. Government are by and large rubbish. They need to stick to facilitating society not getting overly involved in directing it.
Mr Whippy said:
Blue_star said:
IJWS15 said:
Each time one of my pensions goes up I get a letter telling me how much of the LSA and LSDBA it uses.
Why don t the allowances rise with inflation?
Because the conservativez borrowed like crazy in order to avoid raising taxes. Interest on their debt increased substantially (doubled) meaning now our state pays in interest 10bn per month. Direct transfer from the many to the rich. So we have a state to run but high commitments from the past.Why don t the allowances rise with inflation?
They've all done it. No point picking names. Government are by and large rubbish. They need to stick to facilitating society not getting overly involved in directing it.
The amount of tax thresholds that are fixed either temporarily or permanently is ridiculous. Inflation has been something like 25% in the past five years and yet....
Income tax thresholds frozen in 2021 until 2031
The personal allowance clawback was fixed at £100k in 2010
ISA/LISA allowances frozen in 2017
Pension LSA frozen at £268k and LSDBA at £1073k since creation in 2024
Pension annual allowance frozen for good in 2023
Capital gains tax allowance fixed at £3,000 with no allowance for indexation
Starter rate for savings and personal savings allowances frozen for good
Inheritance tax allowances frozen from 2009 until 2030
Car VED supplement threshold of £40,000 frozen since 2017
Pension contribution limit for non-earned set at £3,600 in 2001
These are the ones I can think of. I'm sure there are more.
It really is a sneaky way of increasing taxes on everyone without doing the honourable thing and increasing the rates to what they need to be.
Income tax thresholds frozen in 2021 until 2031
The personal allowance clawback was fixed at £100k in 2010
ISA/LISA allowances frozen in 2017
Pension LSA frozen at £268k and LSDBA at £1073k since creation in 2024
Pension annual allowance frozen for good in 2023
Capital gains tax allowance fixed at £3,000 with no allowance for indexation
Starter rate for savings and personal savings allowances frozen for good
Inheritance tax allowances frozen from 2009 until 2030
Car VED supplement threshold of £40,000 frozen since 2017
Pension contribution limit for non-earned set at £3,600 in 2001
These are the ones I can think of. I'm sure there are more.
It really is a sneaky way of increasing taxes on everyone without doing the honourable thing and increasing the rates to what they need to be.
We have both been taxed more and face increasing cost of living, that is often higher than inflation. CPI and similar show huge increases. And I suspect after2026 the CPI will leap up.
My example:
My first fulltime job was as a teacher in 1996, starting salary was around £23k iirc, with overall NI and Income Tax burden around 12.5%.
Teacher salary in Scotland has a starting salary of just over £36k in 2026, with overall NI and Income Tax burden around 18.2%.
To have the same standard of living as 1996 I would need to earn equivalent of £55-60k, with overall NI and Income Tax burden around 25%.
(Stats from interwebs reading, so may need slight pinch of salt, based on Scottish rates of income tax and no pensions or other salary sacrifice for simplicity).
My example:
My first fulltime job was as a teacher in 1996, starting salary was around £23k iirc, with overall NI and Income Tax burden around 12.5%.
Teacher salary in Scotland has a starting salary of just over £36k in 2026, with overall NI and Income Tax burden around 18.2%.
To have the same standard of living as 1996 I would need to earn equivalent of £55-60k, with overall NI and Income Tax burden around 25%.
(Stats from interwebs reading, so may need slight pinch of salt, based on Scottish rates of income tax and no pensions or other salary sacrifice for simplicity).
Edited by POIDH on Friday 10th April 12:06
Edited by POIDH on Friday 10th April 12:07
Edited by POIDH on Friday 10th April 12:08
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