Savings and Investments thread

Rob7Lee

bobmunro said:

Rob7Lee said:

mcgrandall said:

Rob7Lee said:

mcgrandall said:

valleynick66 said:

bobmunro said:

valleynick66 said:

Is that 10% of all adults pay (some) tax at 40% or 10% of working adults?

Strikes me as low when it’s said the average salary is quoted as c£30k. 

The danger of averages. 

The figures I saw say it is 10% of all adults So if we take the figures at face value only 62% of all adults pay income tax - 38% do not. Figures adjusted for that (I may have the maths wrong of course) would mean roughly 16% of working adults who pay tax pay some at 40%.

Thanks. Likewise when it says 40% tax payers = £87.7bn is that all the tax they (as individuals) pay or just the part taxed at  40%?

Not being awkward just curious how it breaks down. 

I find increasingly ‘average’ is a very misleading figure sometimes. 

The point I’m making is that fiscal drag means more pay tax at 40% but that headline analysis can suggest the ‘wealthiest’ are already paying more than enough when perception is likely somewhere else. 

As we’ve said we have evolved to a complex set up that is very unwieldy. 

Looking at income tax alone has a distorting effect as it does not take account things like regressive taxes or income like capital gains, which is paid at a lower rate. 

It is better to look at something like proportion of total household income that is paid on taxes. I think it is something like the poorest 10% pay 50% of their income on tax, where the richest 10% pay only 40%. The vast majority of that difference will be made up by VAT and council tax. 

As it will always be, based on the fact that the poorest 10% will spend almost every penny whereas the richest 10% will not. You also have the nuance of age. If you take the top 10% of earners by age will be very different as at very different stages of career and experience. At 21 you need to earn £33k to be in the top 10% of that age, at 50 £85k. 

I'm also not sure on your numbers there (but don't know where the 10%  either end falls), I can't see any way that the top 10% only pay 40% tax in totality, before I have spent a penny of my salary, my income tax and NI is nearly 44%, by the time you add on the other taxes on what I then spend I suspect it's well over 50 possibly into the 60's (and I'm tight so don't spend enough or my salary! :-))

What is the point of having a progressive income tax then? Is it to counteract regressive taxes or is it because people on higher taxes can afford to pay more? IMO, if you think it is the second, it is a bit crazy say that the people who can afford to pay more are in effect paying a smaller proportion of their income on all taxes.

You are only really thinking of your salary as income, there are other forms that are taxed at a lower rate, such as capital gains (18-24%). Also wonder if you are taking things in to account like pensions, salary sacrifice or share save schemes, which are parts of your salary that are not taxed. 

As to the figures: UK Still Taxes the Poorest More Than the Richest - Equality Trust this is from 2024. I don't think it takes into account age. You have to appreciate that they are an average, so what you may be experiencing might be very different to someone with a higher income than you in the same bracket. Those households also probably have a disproportionate effect on these figures as well.

When you look at tax breaks/ income taxed at a lower rate that are worth the most (pensions and capital gains) they are only really available to higher income households in reality. The system is very much set up that it is easier to pay less tax if you are a higher earner. 

We have progressive income tax, but you aren't talking about just income tax!

I agree CGT should be equalised with your marginal income tax rate BTW.

Very little of my income benefits from salary sacrifice (and thats changing to) as the naughty people in Westminster cap what I can pay in. Share save schemes are not payable by salary sacrifice, comes out of already taxed income so if I invest £250 a month, thats almost £500 gross earnings, i'll then pay CGT on any gain over the allowance. My last tax return shows my tax rate to be 43.34% purely on PAYE after a small pension salary sacrifice, before I spend a penny in the shops or on bills etc.

Don't disagree with a lot of your points, but come back to this is hugely relative to disposable income, if someone spends 100% (or near) their income whatever level it is, and someone else spends 75%, then likely the one spending 100% is going to be a higher tax payer as a % of income (all taxes) by virtue of what they spend. If I spent every penny i'd hazard my % of gross income spent on tax would dwarf the lowest 10% earners, i'd be in the 70%'s+.

Short of taxing the 'wealthy' 75% plus on all income the dial is not going to move (unless you do something radical like no income tax on salaries below £50k), it's a nature of the beast! 

Lastly, please let me know of ways with being a higher earner I can pay less tax, it's not via pension as I can only pay in less than 1%, it's not having a personal allowance (as I don't get one).......

As a PAYE employee - you can't really (I know you know that).

If you earn good money then you pay more tax. People also get hooked up on percentages - if everyone paid the same marginal rate of income tax then if I gross 10x someone else I pay 10x the tax. I'm not suggesting that everyone should have the same marginal rate as it stands, but if it were that nobody paid income tax on earnings less than £50k it might be a different story.

Agreed, I earn circa 20x my wife, my tax is about 125x what she pays, I’d also love her marginal rate of about 12% 🤣

Chaz Hill

£125 on PBs half max for me, Mrs got £175 on Max and jnr £100. 

cazo

£325 x2 max

Solidgone

£75 on max.

LargeAddick

Rob7Lee said:

TelMc32 said:

£275 on the Premium Bonds this morning on a £40k.  

Forgot to tell them that dad had passed away recently and he’s won £150 😔

You can stay in for 6 months post death (sorry to hear of your loss).

Very interesting to know (have read subsequent post that it's 12 months) and thank you for your condolences.

Zero for me and my missus on 30k joint, nothing for my late Mum on max, £150 for my Dad on max.