This 50p tax rate

MaxwellBygraves

'Rich people want to get even richer' - hardly a shocking headline!

I find it hard to justify why anyone should even earn that amount of money, nevermind why they should have to pay tax on it! Doubtless that several of the regular contributors will disagree with me, and that is fine, but I find it difficult to ignore the fact that so few have so much when so many have so little. Surely we should do more to adress the vast gap in wealth.

rjsterry

Rick Chasey wrote:

rjsterry wrote:

Really? I find that very hard to believe. They really just get a single payslip with £12,500+ in the 'gross' column and it all sits in their current account or at a push an NS&I savings account? They're stupider than I thought.

Completely agree with the mythical nature of private sector efficiency, although the really inefficient ones tend to go to the wall.

One bought a flat, but it's a holiday flat so it's not being rented out. Where it is means that it's the financial equivalent of having your money in a big ISA.

The others live in London, so £150,000 doesn't go as far as you'd think it would.

He'll have some big capital gains to be taxed on then. I live in London, and I reckon I could make it go a fair way. My point was more that they are very likely to have to do a tax return, hence the need for an accountant. I have to do a tax return, but in no way are the figures big enough to get an accountant involved.

DonDaddyD

Rick Chasey wrote:

The others live in London, so £150,000 doesn't go as far as you'd think it would.

What?

I never understand this. Time was £25,000k bought a decent/average living in London. Until recently I would have said it was £28,000K. Of course you have to manage your money and not be bogged down by overdraft and credit card repayments.

£150,000k goes miles. People have lost sight of value.

anonymousblackfg

Rick Chasey wrote:

rjsterry wrote:

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

Someone earning that much on PAYE would almost certainly be receiving some other forms of income, from their employer in the form of shares, company dividends, not to mention the earnings from all that money they'll have in the bank/invested. They'll therefore need to do a tax return, and so will employ an accountant to put the most tax efficient spin on that tax return possible.

Inefficiencies and dead wood: there's a lot of that in the public sector, but the problem is whether the spending reductions are that selective, or just cutting out the green wood too. To over extend a metaphor, if you prune a tree badly, you won't rejuvenate it, you'll just kill it.

Ah I'll disagree with that.

Without wanting to get into how I know that, suffice to say, in my experience, the £150k -£250k earners I know personally don't have alternative incomes.


As for inefficiencies - I think the efficiency of the private sector is overrated. Ignoring the glaringly obvious banking crisis (which, at best, can be called inefficient), my office, which is an 8 person, eat what you kill style firm, very small, mobile office, is totally inefficient.

I'm spending half my time on bikeradar and boss seems to think I'm doing fine.

Every Friday from between 2:30-3:30 till the end of the day is just a total write off with regard to work > and they still make a fortune > mainly because, like many private sectors, it's a boardline racket.

Last week the office was playing catch and indoor cricket >> and they think public sector guys are lazy!

Though I aspire for such earning bracket sadly i'm not facing the dilemna, however the mrs is, there is nothing a good accountant can do at this level, not as an employee anyway, generally the 120 to 160 brack the tax implications make its barely worthwhile in getting the uplift. From my view we need do everything we can to maintain high earners in this country, there is no industry to bring the cash in so we need keep something in the UK.

IT seems a good accountant will only sort you out if you're a contractor or own the business.

jzed

EKE_38BPM wrote:

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

By listening to their accountant?
I'm sure things like where you get paid (local Barclays or Swiss/off-shore account), how you get paid (£ or $ or € or whatever or share options etc), who gets paid (the earner or the earner's 1 year old kid/trustfund), place of residence (non-dom) etc.
One of my cousins worked abroad a lot, but for tax purposes he had to make sure he was only in the country for a certain amount of time, even when he wasn't working.

I think charitable donations reduce your tax liability, so setting up a charity to pay for the upkeep of your very nice house in the country (sung to the melody of Blur's song) because its listed, could help.

There are many loopholes and a good accountant will make sure you stick within the rules but avoid as much tax as possible.

Ok - chap works as a bank manager at Barclays bank. Normal high street branch, gets paid £150k per year in salary, gets some share options, has a mortgage, has some money in the bank gets some interest.

He will not get paid in a Swiss bank account. He is unlikely to have an accountant. Even if he did the accountant would tell him for PAYE purposes where the large bulk of his income comes from he is stuck with. Yes he could go to his employer and ask them to pay his stay at home wife as his secretary. Chances are he'll be told were to go. He'll therefore have a payslip with £150k a year and £58,000 of deductions for tax and NI and take home £92k. Big bankers earning £1m or so may have more sway with there employer for creating more tax efficient ways of receiving income as would self-employed but for a salaried employee I doubt it.

Trust funds and charities- I think we're now talking those with much bigger incomes.

As for your cousin - he has a limit on being in the country as he doesn't pay UK tax. If he goes over that limit, the UK says you know what you really should be paying tax here so we'll have some of that thankyou very much.

rick_chasey

DonDaddyD wrote:

Rick Chasey wrote:

The others live in London, so £150,000 doesn't go as far as you'd think it would.

What?

I never understand this. Time was £25,000k bought a decent/average living in London. Until recently I would have said it was £30,000K. Of course you have to manage your money and not be bogged down by overdraft and credit card repayments.

£150,000k goes miles. People have lost sight of value.

I discussed this before. Let's take a look at this house, for example:

http://www.chardsales.co.uk/Housetobuy/ ... FAF9E969B1

£1.25million in a (very) nice area gets you 2 Bedrooms, 1 Reception, 2 Bathrooms.

That's obscenely expensive.

The nice bits of London are obscenely expensive. The way you guys speak £150,000 is more than you can spend.

It just isn't in London.

DonDaddyD

Rick Chasey wrote:

DonDaddyD wrote:

Rick Chasey wrote:

The others live in London, so £150,000 doesn't go as far as you'd think it would.

What?

I never understand this. Time was £25,000k bought a decent/average living in London. Until recently I would have said it was £30,000K. Of course you have to manage your money and not be bogged down by overdraft and credit card repayments.

£150,000k goes miles. People have lost sight of value.

I discussed this before. Let's take a look at this house, for example:

http://www.chardsales.co.uk/Housetobuy/ ... FAF9E969B1

£1.25million in a (very) nice area gets you 2 Bedrooms, 1 Reception, 2 Bathrooms.

That's obscenely expensive.

The nice bits of London are obscenely expensive. The way you guys speak £150,000 is more than you can spend.

It just isn't in London.

You've proven my point about losing sight of value.

Furthermore, you have just taken one extremely selective area of London and made it the entire basis of your point. Not taking into consideration that the housing market is skewed. Also "the nice bits of London" is largely subjective.

I could find a property for less than half that in a part of London I'd consider 'nice' and near a good school.

£150,000k is a hell of a lot of money. If I earned £70,000 - £80,000k I'd be more than comfortable.

0scar

Great quote from a hedge-fund manager discussing corporation tax in London:

'“If one is a citizen and your country’s having a tough time, you pay your taxes and that’s it – although rather reluctantly if they are not spending it wisely,” Mr Farmer told the Financial Times. “These people [leaving London] can go to Baar and Zug and be in the mountains with little to do and little culture and have lots of money in the bank. Here in London there’s a great variety of culture and lots to do, and maybe less money in the bank, but I prefer this option.”'

http://www.ft.com/cms/s/0/0304fb90-53fa-11e0-8bd7-00144feab49a.html#axzz1HqqjATVy

rick_chasey

I guess the point I'm making is that to talk about this properly ,you need to separate London and the rest of the UK, since the London economy is so vastly different to the rest. What constitutes a lot of earnings in one area won't be a lot in another.

For what it's worth, for the rent of my 1 bedroom flat in London that I share with my GF, I could get a 4 bed detached in a 'award winning picturesque village' near Bradford with a big garden.

It's barely comparable.

rjsterry

Rick Chasey wrote:

DonDaddyD wrote:

Rick Chasey wrote:

The others live in London, so £150,000 doesn't go as far as you'd think it would.

What?

I never understand this. Time was £25,000k bought a decent/average living in London. Until recently I would have said it was £30,000K. Of course you have to manage your money and not be bogged down by overdraft and credit card repayments.

£150,000k goes miles. People have lost sight of value.

I discussed this before. Let's take a look at this house, for example:

http://www.chardsales.co.uk/Housetobuy/ ... FAF9E969B1

£1.25million in a (very) nice area gets you 2 Bedrooms, 1 Reception, 2 Bathrooms.

That's obscenely expensive.

The nice bits of London are obscenely expensive. The way you guys speak £150,000 is more than you can spend.

It just isn't in London.

Like I said, stupider than I thought. I know London has some of the highest property prices on the planet, but where I live is nice too (I would say far nicer - Knightsbridge is horrible and many of the houses are pretty crappy inside. It is ALL about the postcode). For a fifth of the price of that flat, you could get a 3-bed end of terrace with two reception rooms, off-street parking, front garden, and large 100ft rear garden. Might not be quite the image your colleague was after, but you make it sound as though £1.25 million on a 2-bed flat is normal and it isn't by a long way.

rick_chasey

rjsterry wrote:

. Might not be quite the image your colleague was after, but you make it sound as though £1.25 million on a 2-bed flat is normal and it isn't by a long way.

That's true. But the majority of the 50%ers are in London, and live with these prices.

I'm all for the tax, but not because it' s an obscene amount. I'm for it for boring social (slightly left wing) reasons.

clarkey cat

2 bathrooms though RJTerry. 2.

clarkey cat

I'm also a leftie RC (as you know, tee-hee *joins pinkies*) but I think we should get rid of it. As you point out £150k isnt actually a massive amount of money, especially in London.
What we really need is to close up the tax loop-holes. That would raise alot more than an extra 10% on a fairly narrow band of PAYE earners.

DonDaddyD

Rick Chasey wrote:

I guess the point I'm making is that to talk about this properly ,you need to separate London and the rest of the UK, since the London economy is so vastly different to the rest. What constitutes a lot of earnings in one area won't be a lot in another.

For what it's worth, for the rent of my 1 bedroom flat in London that I share with my GF, I could get a 4 bed detached in a 'award winning picturesque village' near Bradford with a big garden.

It's barely comparable.

I accept what you're saying to a point.

It's just that this whole "it's London so it's expensive so we need to get paid more" compounds on the issue that leads to situations like the 50% tax rate and people getting paid huge amounts and claiming that it isn't really that much because "it's London".

Not everyone needs a new - 4year old Audi, 3-4 bedroom semi-detached and has to live within Zone 3 to enjoy London and live comfortably. As I said people have lost sight of value. I earn less than a 3rd of the discussed £150,000k and I live a good life, can afford to keep my home and my family and have money left over for me.

£150,000k is a huge amount of money when you consider £50,000k can leave you happy and £30,000k can see you comfortable.

Also I'd happily live:
Here: http://www.findaproperty.com/displaypro ... id=9133883 £265,000 4 bedroom, Norbury
Here: http://www.findaproperty.com/displaypro ... id=8625451 £350,000, 3 bedroom, Raynes Park
Here: http://www.findaproperty.com/displaypro ... d=10389914 £339,000 3 bedroom, Wimbledon

And that's just a quick look at my beloved South West London. Tell me in relative terms £150k isn't huge again?

EKE_38BPM

JZed wrote:

EKE_38BPM wrote:

JZed wrote:

rjsterry wrote:

Asprilla wrote:

If anyone earning around £150k doesn't have accountant good enough to keep them below the 50% bracket then that's their fault.

Well that rather illustrates my point.

Why would someone earning £150k have an accountant? How does someone earning, through a salary, £150k avoid PAYE?

By listening to their accountant?
I'm sure things like where you get paid (local Barclays or Swiss/off-shore account), how you get paid (£ or $ or € or whatever or share options etc), who gets paid (the earner or the earner's 1 year old kid/trustfund), place of residence (non-dom) etc.
One of my cousins worked abroad a lot, but for tax purposes he had to make sure he was only in the country for a certain amount of time, even when he wasn't working.

I think charitable donations reduce your tax liability, so setting up a charity to pay for the upkeep of your very nice house in the country (sung to the melody of Blur's song) because its listed, could help.

There are many loopholes and a good accountant will make sure you stick within the rules but avoid as much tax as possible.

Ok - chap works as a bank manager at Barclays bank. Normal high street branch, gets paid £150k per year in salary, gets some share options, has a mortgage, has some money in the bank gets some interest.

He will not get paid in a Swiss bank account. He is unlikely to have an accountant. Even if he did the accountant would tell him for PAYE purposes where the large bulk of his income comes from he is stuck with. Yes he could go to his employer and ask them to pay his stay at home wife as his secretary. Chances are he'll be told were to go. He'll therefore have a payslip with £150k a year and £58,000 of deductions for tax and NI and take home £92k. Big bankers earning £1m or so may have more sway with there employer for creating more tax efficient ways of receiving income as would self-employed but for a salaried employee I doubt it.

Trust funds and charities- I think we're now talking those with much bigger incomes.

As for your cousin - he has a limit on being in the country as he doesn't pay UK tax. If he goes over that limit, the UK says you know what you really should be paying tax here so we'll have some of that thankyou very much.

In your example, I see your point, but an accountant will help said bank manager to limit his tax exposure by tax avoidance methods. I don't know what they are, but I know they exist. If an accountant allows the bank manager to avoid £5k in tax and charges £2k thats a £3k saving and would be considered worth it (new Pinarello for Mr Bank Manager).

I understand why my cousin had to limit time in the country, but if someone like him (who wasn't on £150k) knows how to limit his tax exposure, then someone taking advice from an accountant would know this and many more 'tricks' to avoid paying tax. I'm not talking about tax evasion, just avoidance (which is legal).

The average person reads the rules once to see what they have to do. A clever person reads the rules twice. Once to see what they have to do, and again to see what they can get away with.

Paraphrased very badly from a quote by Colin Chapman of Lotus

rick_chasey

clarkey cat wrote:

I'm also a leftie RC (as you know, tee-hee *joins pinkies*) but I think we should get rid of it. As you point out £150k isnt actually a massive amount of money, especially in London.
What we really need is to close up the tax loop-holes. That would raise alot more than an extra 10% on a fairly narrow band of PAYE earners.

Yeah probably. But since 50% is here, why not keep it for now?

It's more effort to scrap it than leave it right now.

As an aside, UK gilts have never been cheaper. Now's the time for some Keynsian stimulation..*rubs hands*

DonDaddyD

Rick Chasey wrote:

rjsterry wrote:

. Might not be quite the image your colleague was after, but you make it sound as though £1.25 million on a 2-bed flat is normal and it isn't by a long way.

That's true. But the majority of the 50%ers are in London, and live with these prices.

No they don't.

In my experience there are a select few (usually people who grew up outside of London, have moved to the city, got the salary and pay a premium they perceive is attached with "London").

jedster

In your example, I see your point, but an accountant will help said bank manager to limit his tax exposure by tax avoidance methods. I don't know what they are, but I know they exist.

You know Eke, that's pretty much bollocks. If you are employed (as opposed to running your own business) there is very little that you can do to avoid income tax. I get paid in a mixture of cash and shares. The shares are in a US company and when I actually get them (years after they are awarded) they go to a US brokerage and any sales proceeds go to a US bank account. Sounds like an opportutiny to avoid tax? Not at all, all of that gets reported through my PAYE and taxed by the inland revenue. The only thing I can do to avoid tax is the same thing as you - pay into my pension. And of course that gets taxed when I draw it in retirement.

These days the UK income tax system is actually pretty simple and doesn't have all those loopholes. Certainly proper companies wouldnt play fast and loose with that stuff anyway.

I think most Brits just have to pay up and very few are moving abroad. I do know people that HAVE moved abroad in response to the 50% tax rate though. These are typically not Brits, the one I know are other Europeans who were working and living in London but whose work involved a lot of travel. Given they didn't have deep roots in London, it was easy for them to switch to working from an office in Switzerland. They are still in London quite a lot (just like they are in Paris, Frankfurt and New York) the difference is they are keeping much more of their salary and the the UK Treasury has lost all their income tax, NI, council tax, most of their VAT, etc, etc.

I tend to agree with that guy quoted in the FT - the country is in a mess, everyone needs to do their bit and most people will just pay up. That said, I think it takes quite a lot of us paying up the extra 10% to compensate for those peopel who have moved to Switzerland and I'm not sure the sums stack up for the Government. Longer-term, I agree with DDD, simple justice and freedom suggests that if you earn a £1 you should be able to keep at least 50p*.

*Incidently, that should apply at the botttom end where if you earn an £1 you shouldn't lose more than 50p in benefits.

I'm pretty annoyed by your suggestion that someone like me is stupid because I obey the law and pay my taxes. Frankly that's a pretty disgusting attitude to take.

J

Clever Pun

TheStone wrote:

Include national insurance and it's closer to 65%. And then vat/duty/tax on spending the 35% left over.
That said, I doubt many people can justify earning above 150k.

Someone I know is in the big boy bracket and he's going to cut his workload and and kick in his pensions early so he pays less tax and takes home more money.

I suspect most that earn enough to hit the 50% bracket will be smart enough to avoid it tbh eg paying the excess into pensions and not paying tax on it essentially

davmaggs

I'd prefer to see loopholes being closed off that mean that non-doms (think South African IT workers through to millionaires) get to earn in the UK and shove off abroad taking the money with them, or Russian billionaires buying houses worth tens of millions and paying £0 in stamp duty whilst PAYE gimps hand over tens of thousands for a semi in zone 6.

At the moment we have a situation this year where the British (average) worked from January 1st and May 29th for nothing because nearly six months of income is taken by the state. It is only from the 30th May onwards that the income is yours.

So, rather than envy at those earning well I'd like to see the super rich paying what the rest of us do combined with the state staying out of our pockets and doing far less.

clarkey cat

I'm pretty annoyed by your suggestion that someone like me is stupid because I obey the law and pay my taxes. Frankly that's a pretty disgusting attitude to take.

J

Tru dat. If you are sneaky with benefits then you're a cheating scrounger. If you are sneaky with tax evasion then you're a smart operator.

jamesco

DonDaddyD wrote:

I'm nowhere near earning £150,000 per year but as a point of principle I think that no one should ever pay tax that is more than or equal to the amount they take home.

3 pages and noone pointed out that this is a marginal tax rate? It only applies to income above the £150,000 threshold. Earning £150,001 doesn't result in HMRC taking 50% of it all, only 50% of that one extra pound.

DonDaddyD

jamesco wrote:

DonDaddyD wrote:

I'm nowhere near earning £150,000 per year but as a point of principle I think that no one should ever pay tax that is more than or equal to the amount they take home.

3 pages and noone pointed out that this is a marginal tax rate? It only applies to income above the £150,000 threshold. Earning £150,001 doesn't result in HMRC taking 50% of it all, only 50% of that one extra pound.

Yeah I know that.

It was poorly written. Well incorrectly written, my apologies.

Let me make it clear. I don't think they should take 50% of what you earn even over a certain threshold. You should always be able to take home more than what is given to the state. So that £1 over the threshold I don't think it's right they take 50% of that.

Inheritance tax should go as well, disgusting that.

jzed

Clever Pun wrote:

TheStone wrote:

Include national insurance and it's closer to 65%. And then vat/duty/tax on spending the 35% left over.
That said, I doubt many people can justify earning above 150k.

Someone I know is in the big boy bracket and he's going to cut his workload and and kick in his pensions early so he pays less tax and takes home more money.

I suspect most that earn enough to hit the 50% bracket will be smart enough to avoid it tbh eg paying the excess into pensions and not paying tax on it essentially

Didn't they put a limit on the amount that can be put in to pensions for 50%ers to prevent this?

jamesco

DonDaddyD wrote:

Let me make it clear. I don't think they should take 50% of what you earn even over a certain threshold. You should always be able to take home more than what is given to the state. So that £1 over the threshold I don't think it's right they take 50% of that.

Inheritance tax should go as well, disgusting that.

50% doesn't worry me, but no problem, we all have different opinions what a fair rate is. Wiping out estate tax, on the other hand, would be utter madness unless you want an entrenched aristocracy, an impoverished population and no social mobility.

rhext

Anyway, if you think the 50p marginal rate is bad, what about the 60p marginal rate that cuts in between £100K and £119K?

DonDaddyD

jamesco wrote:

DonDaddyD wrote:

Let me make it clear. I don't think they should take 50% of what you earn even over a certain threshold. You should always be able to take home more than what is given to the state. So that £1 over the threshold I don't think it's right they take 50% of that.

Inheritance tax should go as well, disgusting that.

50% doesn't worry me, but no problem, we all have different opinions what a fair rate is. Wiping out estate tax, on the other hand, would be utter madness unless you want an entrenched aristocracy, an impoverished population and no social mobility.

I take real issue with people looking at what other people have. I don't care about entrenched aristocracy that's there look out.

If I've worked hard to leave something behind for my loved ones I don't see why the Government should take any percentage/portion of that. I find the very thought of it absolutely disgusting.

tailwindhome

DDD, what is your obsession with Tax and specifically the 50p rate??

How many threads can you start on the one topic?

Bless your cotton socks you're the life and soul of this forum but enough already.

DonDaddyD

Ya what now!?

It's a current subject, being discussed on the radio, BBC, newspapers.

I make threads that interest me. Forum topics like real life conversations are often reoccurring/repetitive. The subject itself has seen three pages so clearly people are willing to discuss it.

I could understand if this was still on page one. But there are 3 pages of rich discussion so not really seeing what the issue is to be honest...

il_principe

Inheritance tax is disgusting. Or at least it was in the early 80's as my dear Mum will attest - had to sell her home to pay the sodding bill.