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kingstongraham

So at what level of marginal tax rate would you actually step back and change jobs to one where you need to work less hard for less money?

wallace_and_gromit

KingstonGraham wrote:

So at what level of marginal tax rate would you actually step back and change jobs to one where you need to work less hard for less money?

50% due to the psychological impact of paying more than half your extra income directly to the government.

At least with the 62% tax band, you can reduce your marginal rate by either upping pension contributions or earning more.

In the finance world, plenty of small organisations changed to be LLPs when the 50% tax rate came in. The costs of setting up such structures were worth it given the NI savings that result from being self-employed as a Partner.

TheBigBean

Surrey Commuter wrote:

Stevo 666 wrote:

TheBigBean wrote:

Labouring going for the 72% tax bracket between £100k and £123k. Still, Tories got away with 62%, so I imagine it will be fine.

They can F.R.O. (Well the electorate will tell them to do that on the 8th June).

Brown introduced the 62% but Tories have not amended in 7 years.

Stevo does that mean you will be voting LibDem or will you just up your pension contributions to avoid paying it along with 90% of everybody else.

It would be far more honest (and productive) to drop the top rate threshold to £100k

All else equal (pension contributions) that would work out to be less. They would either have to drop it below £100k or increase the top rate. Neither is appealing so the 62% bracket remains.

mamba80

Stevo 666 wrote:

I don't have a big objection to state/private partnerships if they are right in the individual cases in question. That said I'm no expert on PPP.

One thing I would say though is there there has been more than one comment on here (including yours above) that other states seem to be able to run public services well or at least better than the UK. This seems to be based on short term observation as an outsider/visitor and on the basis that there is nothing visibly wrong. I'd like to some evidence or at least feedback from those in the countries in question to back that up.

Agree, a week in the sun is hardly an in-depth analysis!

however i lived in Sweden for 2 years and dated a Swedish lass for 5, and they certainly seemed to be on the ball re roads, public transport/railways and health services.

I ve also had reason to visit UK and European hospitals and its the UK ones that seem to have extremely poor AE services.

Friends of mine having lived in UK for 9 years last year returned to Poland, their opinion was the UK nhs is terrible compared to Polands, one reason, now they ve got a baby, to return back home.

Its also worth noting that throughout the 70s euro car makers had to face up to the rise in high quality jap imports, yet it is the UK that lost all its indigenous car makers, europe kept theirs.

chatting to the same hotel staff we ve gotten to know over the last few years in Pollensa and it was very interesting their take on the Spanish recession/unemployment/brexit, very passionate that economy is now growing. unemployment is falling but wages still low in parts of spain and that the UK is mad to be leaving the EU.....

we do some great things in the UK but imo running high quality public services isnt amongst them.

kingstongraham

Wallace and Gromit wrote:

KingstonGraham wrote:

So at what level of marginal tax rate would you actually step back and change jobs to one where you need to work less hard for less money?

50% due to the psychological impact of paying more than half your extra income directly to the government.

At least with the 62% tax band, you can reduce your marginal rate by either upping pension contributions or earning more.

In the finance world, plenty of small organisations changed to be LLPs when the 50% tax rate came in. The costs of setting up such structures were worth it given the NI savings that result from being self-employed as a Partner.

Add the 40% tax bracket to the NI, that's over £45,000 then. Edited to add - I'm wrong here.

You can only up your pension contributions to the level of your earnings and a maximum pension pot size. If you are earning loads, that won't last all that long. But then, you are doing OK.

mrfpb

Where does the 62% come from - current top rate is 45% tax + 2% NI if you earn over £150,000 (40%+2% over £45,000). The 12% NI only applies to the first £45,000 earned. So current Labour plans are for 50% + 2% for earnings above £123,000. 45%=2% for £80000-123,000.

That's still only 52% max. It breaks the psychological 50% barrier for sure, but lets be honest about the true figure.

mamba80

KingstonGraham wrote:

reallyarunner wrote:

Wallace and Gromit wrote:

mamba80 wrote:

...May banging on about the Tories being strong and stable, even blaming labour for the banking crisis...

It's shocking isn't it? The government that had been in charge of bank regulation for a decade getting blamed for a problem with the banks when everyone knows it was Father Christmas, George Bush and Maggie Thatcher that caused the crisis in the UK.

I seem to remember it being a global financial crisis?

Which affected some countries more than others.

affected countries with global financial presence far more than countries without, same with the banks, some needed buying out, some didnt.
UK banks were not dishing out loans to the low paid and unemployed to buy property.

Neither party wanted increased regulation and its the EU's EBA that have set up stress tests for the banking industry...

kingstongraham

mrfpb wrote:

Where does the 62% come from - current top rate is 45% tax + 2% NI if you earn over £150,000 (40%+2% over £45,000). The 12% NI only applies to the first £45,000 earned. So current Labour plans are for 50% + 2% for earnings above £123,000. 45%=2% for £80000-123,000.

That's still only 52% max. It breaks the psychological 50% barrier for sure, but lets be honest about the true figure.

At £100k, the tax free allowance starts disappearing, so the marginal rate at that point is 62%. For each £2 you earn, you pay tax at 40% on £1 more.

Edited to correct.

mrfpb

So that's 62% from £100,000 to £111,500, then back to 42% for pay above £111500.

kingstongraham

mrfpb wrote:

So that's 62% from £100,000 to £111,500, then back to 42% for pay above £111500.

£100,000 to £123,000 - you lose £1 of allowance for each £2 over 100k.

mrfpb

Surely that only 52% then, as you are losing 20% of 50% of your allowance, that's an additional 10% marginal on top of the 40% tax + 2% NI.

kingstongraham

mrfpb wrote:

Surely that only 52% then, as you are losing 20% of 50% of your allowance, that's an additional 10% marginal on top of the 40% tax + 2% NI.

Sorry - corrected it. You lose your allowance, and then pay 50% of the higher rate of 40% on that. You've already used up all of your standard rate band.

kingstongraham

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

It's a balance, but I'm not convinced a 50% top rate pushes it over that balance either. Or an extra 1% on the higher rate.

mrfpb

KingstonGraham wrote:

mrfpb wrote:

Surely that only 52% then, as you are losing 20% of 50% of your allowance, that's an additional 10% marginal on top of the 40% tax + 2% NI.

Sorry - corrected it. You lose your allowance, and then pay 50% of the higher rate of 40% on that. You've already used up all of your standard rate band.

OK, that makes sense to me now.

KingstonGraham wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

It's a balance, but I'm not convinced a 50% top rate pushes it over that balance either. Or an extra 1% on the higher rate.

But during the 70s-80s the tax office found that reducing top tax rates reduced how aggressively top earners avoided tax - eg rock stars were less likely to take their "year out" abroad when the top rate dropped from 95% to 40%. That represents a small group, but the trend was replicated across high earning groups.

TheBigBean

KingstonGraham wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

There's three reasons for this:
1. Ignorance of the effective tax rate
2. Ability to make pension contributions
3. Inability to reduce workload pro-rata.

But if I earnt £110k, couldn't make pension contributions, could work 10% less for a pro-rata salary reduction and was subject to Labour's 72%, I would.

surrey_commuter

TheBigBean wrote:

KingstonGraham wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

There's three reasons for this:
1. Ignorance of the effective tax rate
2. Ability to make pension contributions
3. Inability to reduce workload pro-rata.

But if I earnt £110k, couldn't make pension contributions, could work 10% less for a pro-rata salary reduction and was subject to Labour's 72%, I would.

same circumstances but 62% - would you take a pro-rata salary reduction?

Being "only" on £110k you would be unlikely to have maxed out lifetime allowance and be well below your £40k annual limit

TheBigBean

Surrey Commuter wrote:

TheBigBean wrote:

KingstonGraham wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

There's three reasons for this:
1. Ignorance of the effective tax rate
2. Ability to make pension contributions
3. Inability to reduce workload pro-rata.

But if I earnt £110k, couldn't make pension contributions, could work 10% less for a pro-rata salary reduction and was subject to Labour's 72%, I would.

same circumstances but 62% - would you take a pro-rata salary reduction?

Being "only" on £110k you would be unlikely to have maxed out lifetime allowance and be well below your £40k annual limit

At 62% it would depend on other circumstances. It's not as clear cut.

Yes, the pension is available hence my listing it as one the three reasons people don't reduce their salaries.

Stevo_666

TheBigBean wrote:

Surrey Commuter wrote:

TheBigBean wrote:

KingstonGraham wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

There's three reasons for this:
1. Ignorance of the effective tax rate
2. Ability to make pension contributions
3. Inability to reduce workload pro-rata.

But if I earnt £110k, couldn't make pension contributions, could work 10% less for a pro-rata salary reduction and was subject to Labour's 72%, I would.

same circumstances but 62% - would you take a pro-rata salary reduction?

Being "only" on £110k you would be unlikely to have maxed out lifetime allowance and be well below your £40k annual limit

At 62% it would depend on other circumstances. It's not as clear cut.

Yes, the pension is available hence my listing it as one the three reasons people don't reduce their salaries.

Pension contributions are your friend here if you are in these circumstances. Makes for a very tax efficient form of investing for retirement.

DesB3rd

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

Governments don’t worry about that individual – they worry about the dozens of marginal decisions summed across an economy of millions of individuals – which in the grand scheme of the economy makes a significant difference.

The possibility of £10k wage-spike/bonus that works out as £6k might be enough to completely focus your attention, while a £4k take-home on the same won’t see you throw in the towel but it might see you out the door at 5pm rather more often. That behaviour might not impact your/your team’s output much, or at all, but the same behaviours will produce a statistically significant smattering of degraded outputs across the economy.

In this respect the poverty of UK management the post-war era is very understandable; a surprising c.700,00 paid top-band in the 1970s and they had to choose between “chase the extra £1 which is actually 25p” and “take-off the extra hour which is a full 60 minutes” – little wonder that Friday afternoon golf and general half-heartedness were the order of the day…

kingstongraham

It is more likely that if paying someone an extra £25,000 costs the company £100,000 then that £100,000 isn't available to pay several more lowly individuals.

pblakeney

DesB3rd wrote:

... while a £4k take-home on the same won’t see you throw in the towel but it might see you out the door at 5pm rather more often...

Would that really be such a bad thing? As I type this and look around the office I can confidently say that production could be maintained in less hours.

mamba80

DesB3rd wrote:

But I still don't think someone earning £110,000 is likely to say "I'm not putting up with this, I'm going to get me a low pressure job paying £95,000".

Governments don’t worry about that individual – they worry about the dozens of marginal decisions summed across an economy of millions of individuals – which in the grand scheme of the economy makes a significant difference.

The possibility of £10k wage-spike/bonus that works out as £6k might be enough to completely focus your attention, while a £4k take-home on the same won’t see you throw in the towel but it might see you out the door at 5pm rather more often. That behaviour might not impact your/your team’s output much, or at all, but the same behaviours will produce a statistically significant smattering of degraded outputs across the economy.

In this respect the poverty of UK management the post-war era is very understandable; a surprising c.700,00 paid top-band in the 1970s and they had to choose between “chase the extra £1 which is actually 25p” and “take-off the extra hour which is a full 60 minutes” – little wonder that Friday afternoon golf and general half-heartedness were the order of the day…

If you dont think a £4k take home pay increase is enough to make you go the extra mile, then a: you dont deserve it and b: you earn too much.

i see plenty of people who will do as little as possible at work and its got zero to with salary or tax rates but how they are treated by their employers (and how their employers behave)
strange isnt that countries that dont have zero hour contracts and have a more unionised work force also have better productivity....

wallace_and_gromit

mamba80 wrote:

strange isnt that countries that dont have zero hour contracts and have a more unionised work force also have better productivity....

It's not strange at all. They generally have higher unemployment too.

surrey_commuter

Wallace and Gromit wrote:

mamba80 wrote:

strange isnt that countries that dont have zero hour contracts and have a more unionised work force also have better productivity....

It's not strange at all. They generally have higher unemployment too.

I am going to agree with you - so take a seat.

Those lucky enough to have a job get well paid as they have so many employment rights. Productivity is high because organisations invest in labour saving devices to avoid hiring people they will not be able to get rid of.

also chuck in multi-nationals hiring anywhere but France

France is a wonderful example.

mamba80

Wallace and Gromit wrote:

mamba80 wrote:

strange isnt that countries that dont have zero hour contracts and have a more unionised work force also have better productivity....

It's not strange at all. They generally have higher unemployment too.

whats your point?

i d like to know how counting unemployment rates have changed since we last saw 4.7% unemployment rate in the UK, back in the 70's .... where apparently Labour wish to take us lol!

one example... take out the fact the 16yo's have to stay in full time ed or training until 18 and our youth employment might not look so rosy.

Pross

Why have zero hours contracts become such a demon? The contracts themselves are fine, my daughter chose one over a 16 hour contract as it gives her flexibility. Labour are talking of banning them which ignores the fact that they work really well for some people, what they should be doing is looking at ways to stop employers abusing them which is where the problem is as usual.

Stevo_666

Pross wrote:

Why have zero hours contracts become such a demon? The contracts themselves are fine, my daughter chose one over a 16 hour contract as it gives her flexibility. Labour are talking of banning them which ignores the fact that they work really well for some people, what they should be doing is looking at ways to stop employers abusing them which is where the problem is as usual.

Its largely leftie propaganda.

Only 2.8% of the workforce are on zero hours contracts and of those, around 2/3 are OK with the hours they work.

If Labour banned them the likely result would be more unemployment and less people with the flexibility that they need.

Alain Quay

[quote="
If Labour banned them the likely result would be more unemployment and less people with the flexibility that they need.[/quote]

So long as it's other people on zero hour contracts, eh.

If that damn Abraham Lincoln bans slavery, the likely result would be more unemployment and less people with the flexibility that the employers need.

Pross

Alain Quay wrote:

[quote="
If Labour banned them the likely result would be more unemployment and less people with the flexibility that they need.

So long as it's other people on zero hour contracts, eh.

If that damn Abraham Lincoln bans slavery, the likely result would be more unemployment and less people with the flexibility that the employers need.[/quote]

So you don't think there are plenty of people for whom zero hours are a good option? It's not just employers that want flexibility, there are people with partners who work shifts or who share custody of their kids with an ex or students who need to work but have to fit around study and exams. The problem is employers abusing the contracts so that's what needs sorting out rather than banning something that tens of thousands of employees as well as employers find useful.

rick_chasey

The issue is when zero hour contracts are used by firms to shirk responsibilities to employees who they are employing as a full time employee for all intent and purpose.

No one has an issue with people wanting to work flexi.

The issue is when it's not used as it was intended.