It's equivalent. The entity giving you tax credits and benefits is also taxing your income. It is not more work for your employer or you yourself. The accountant software, or the Tax Return software, just works it out for you. I still think it's a bonkers way to calculate tax owed or benefits owed.
The tax system of the UK seems especially designed to pick the pockets of the middle and upper middle classes. The 62% tax band between 100k and 125k, cleverly disguised as the "personal allowance taper" is especially egregious and is the reason I tend to go into an incoherent rage about taxes. When you factor in that you instantly lose tax-free childcare and 30 hours free childcare the moment you earn a pound over 100k (no taper at all), the effective marginal tax becomes greater than 100%, so you're actually worse off than if you earn under the threshold. That's why when my kid was in nursery, I deliberately had to contribute large sums of my pay into my pension to stay below this crucial threshold. Everyone lost out as a result of this maddening corner case - I lost out on disposable income, the government lost out on income tax revenue, and the economy lost out because that money is being saved instead of spent. Then there's the fact that the taxation system heavily penalises families with a stay-at-home parent and a high-earning breadwinner because there's no joint assessment unlike other countries. A friend of mine is in the worst possible situation as he earns roughly 100k from consulting while his wife doesn't work. Overall they get taxed significantly more than a couple earning 50k each, and also miss out on child benefit, despite both situations having the same amount of gross income coming into the household. Finally, other countries provide plenty of deductions that just don't exist in the UK. Things like mortgage interest or public transport commuting costs are deductible in many other European countries but not here. Why? Commuting by bus or train is an expense of doing a job, it's a publicly funded service and it encourages people to not drive which has social benefits, you shouldn't have to pay income tax on the cost of it.
Glad it’s not just me who goes into an incoherent rage about taxes in this country! At least take comfort in the fact that it’s a 69.5% tax trap up here in Scotland - I’d save thousands in taxes a year by living south of the border!
@@blackhavaianas I've heard of quite a few Edinburgh-based finance folk who immediately upped sticks and moved south of the border the moment the tax changes were announced, either to Berwick or all the way to London. Not because it massively impacted them but because it sent a signal on which way the tax winds were blowing in Scotland.
@ Makes sense, I will likely move to the US in the next 1-2 years, as that’s an option with my job. I love this country but feel I can’t really progress financially with the current tax levels.
The problem is (as the video has stated), it will always have winners and losers across all economic backgrounds. For example, pensioners will be furious if council tax rates have changed. The working class will be furious as if they live in somewhere like Putney, they could be charged a wealth tax for having a house that is over £1 million in value.
Entire bureaucracy needs a revamp, it's a 1000 years of tinkering and loopholes, tonnes of things kept in just for tradition sake and permits and laws that simply do not keep with the times as updating them sends out a cascade of nonsense as it's all this interconnected mess. Dump the entire thing, start again.
@@dealbreakercPeople really need to get out there head that 100k makes you wealth. In today's society you are very much close to anyone else in the lower bands. I've lived in Japan and 100k there warrants the comment you made but in the UK 100k means nothing today.
@@tomlxyz and so they don't matter? The 2% who make up over 30% of our national income tax should just get fucked with a 70% marginal tax rate. God forbid that they want children and effectively pay over 100% taxes between 100k and ~130k
@@tomlxyz that doesn't mean 100K in London is rich, it just means people in the provinces are not as well off as they should be, despite the lower cost of living. If to have that job and kids you need to have the same disposable income as someone living in Leeds, you're not better off financially. The weather isn't so much better either, and while you have more access to museums, it doesn't improve your local cinema or Sainsburys.
5:40 I think this quite misleading. As stated in the previous slide, council tax is based on the value in 1991, or an estimate of what that would have been. The Southend property may be worth 321k now but that is not a band H property at all. The message that council tax is regressive is true but this is not illustrating it properly. The main point of council tax being regressive that it isn't proportional to the property price - a small house in the north will be paying a higher percentage of the property's value in council tax than a large house in london.
The video got Council tax pretty wrong. The bit they got right was the bands, but each Council sets what rate should apply to homes in each band in their area. So whilst it is true that a £321,000 house (at 1991 values) in Southend would be in band H just as a £38m mansion in Kensington that provides no information as to what the owners will actually be paying - the owner of the Southend property might be paying more than the owner of the Kensington property
At least most of our taxes are automatic rather than having to file them manually like they do in the US. But Yes the UK system should definitely be simplified from the Government Admin side and made fairer for poorer households
uhh, i'd much rather the US system, UK taxes are too punitive and are mostly squandered by bureaucrats or used to fund stuff in foreign countries. It's not as bad in the US.
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The other thing about the child benefit is that it based on one parent's income, meaning one parent earning 80k gets nothing but if two parents are on 59k they get the full benefit.
@@UnlikeMitchelluniversity education benefits the whole economy, not just those who attend university. An effective 9% graduate tax that anyone who isn’t PAYE gets to opt out of , is in no way fair or makes sense.
@@silliestsususagest3276 I don't disagree, we should be giving student loan relief/reductions to STEM, doctors, teachers, etc, people that require and use their degrees. Those going 'for the experience', eg doing modern art should pay their own way.
The 60% tax at £100k - £125k is absolutely maddening. Make the 45% band at £125k into a 50% band and get rid of that 60% band (scrap the personal allowance taper) entirely.
The amount of mental effort people paid 95-140k spend managing this issue is inefficient for country's productivity. I just pensioned the F out of everything above 100k, so retired at 44. A more sensible tax scheme and I'd have saved weeks of mental effort / planning and worked another few years
That would mean an effective tax rate of 52% when you include 2% NIC, so more than half of your income would be lost to tax. I can tell you I wouldn’t work for that.
Combined with the recent video on land tax, this just proves that the tax system in the UK is designed to get money for the average Joe and leave alone the rich. Not surprising as the UK keeps voting in rich people with the expectation they care about poor people.
Council tax needs to be updated, and include land values so that it applies to empty plots. Why are we charging businesses a fortune in business rates when people who waste valuable land are charged nothing!?
If an empty plot of land is generating no income, how should it be taxed? If your logic applied to objects, the owner of the Mona Lisa would probably pay £1b a year just to own it. It doesn't really make sense.
@mandrakejake the thing is with owning land that is different to the mona lisa is that taking up space to just leave vacant in a valuable area is a cost on the rest of society and they should compensate for it.
Something not mentioned here is loss of certain benefits at specific earnings, too. You mentioned the loss of the personal allowance at £100K+, but what wasn't mentioned was that going over 100k also IMMEDIATELY loses you free childcare hours and childcare contributions. This isn't just a deterrent - two working parents with a child in childcare, with one of them being a high earner, is actively WORSE OFF taking a higher pay at certain points. The only remedy is to reject any pay rises, or immediately plow any extra earnings into a SIPP, which isn't exactly hugely stimulating for the economy. Benefits are applied at a household level, but their criteria is based on the individual. This isn't the '50s where every mum is homebound - we live in a society where both parents are EXPECTED to work, and I imagine the economy relies on this to some extent. This is the other part that doesn't make sense. All of this wouldn't be so bad if it felt like our hard earned money was actually being used wisely - but after 14 years of Tory rule, it's been consistently spunked up the wall, and people have very little patience for it now.
@@dealbreakerc Earners over 100k don't make up as many people as they should, but they pay a disproportionate amount of taxes. Several of my friends just went to Dubai once they hit that level 😢
@@danielb7006good for your friends. I frankly don't give a fuck about people earning that much complaining about taxes when millions more people work just as long as just as important jobs and struggle to make ends meet.
@NanoLT it is a big deal when high earners are disincentivised from earning more and contributing further the economy. Not even to mention that inflation and fiscal drag means £100k isn't worth nearly as much anymore. These high earners are not the enemy - they are far closer to the median earner than they are the super wealthy.
Almost everything in the UK is. UK usually works on one system in England and Wales, another system in Scotland and a third system in Northern Ireland.
I'll never complain about the complexity of the US tax system again haha. That's insane, it literally looks like something Thatcher would've crafted out of pure spite for the middle class.
No the house prices are over-inflated. My parents home is currently worth over £100k. They paid £5k for it back in the late 70s. With inflation it should be worth around £25k in today's market. And it's just a semi-detached in Yorkshire. London property values are inflated even higher. Homes should be homes not "asset classes" used to make up for a lack of genuine wealth and a cash racket to prop up the banks whilst tying people into debt slavery to buy a home marketed at 20 times it's actual value.
@@loc4725 Then they need to lower house prices in line with council tax bands. That would also address the problem of everyone under the age of 30 (including myself) not being able to get their own home.
On a cost neutral basis. At each local council level. So won't be much impact at all. Won't result in south subsidising Sunderland more than does at moment. But positive outcome that shuts up the "why using 1991" squeal
@@leonbanks5728 *"Then they need to lower house prices in line with council tax bands."* As someone who's older let me give you a leg up on how this works. For decades governments of both colours have been trying to pump up house prices, mainly so that Boomers who had not saved for retirement (and there's *a lot* of them!) could instead sponge off later generations by buying up houses, pricing out the young and living off the rental income. This inevitably meant that money which should have gone into the productive economy though shares and investments instead went into pushing up house prices. So fast forward and now we're once again in the situation where banks are vulnerable and any shocks to house prices will consequently cause catastrophic damage to the economy. And the growth which we should now be seeing hasn't happened because unlike in other countries we didn't invest in ourselves. One thing you should absolutely be doing though is being sympathetic to and supporting those Boomers who are living alone in 3-4 bed houses whilst on pensions of up to £51,000 a year and who, thanks to Labour won't be getting the winter fuel allowance. Don't worry about the genuinely poor ones though; they're guaranteed social housing because of their age and will still get the allowance as it's now means-tested. It's only the 'poor' entitled wealthier Boomers who are living beyond their means who are going to freeze to death (allegedly) this winter, and as you've probably noticed there's a lot of them about.
@@danielwebb8402 It’s either they do that or they put the house prices down to the 1991 council tax band levels, which would help anyone under the age of 30 (me included) get their own house.
It gets even worse for Inheritance tax - I am in my late 60s and working do pay 20 or 40% on my income but since I am in the band that losses my tax free allowance do when I die this earned money will be taxed at 40% and I will loose 40% allowance - so absolutely no point in working
Student loans should also be discussed due to people having a lot borrowed in student loans and the interest rates on those loans. People struggle to pay off these loans in their working lives. The loan turns into an ~8% increase in your marginal tax rate throughout your working life rather than a loan you will pay off. Considering that a large amount of the working population is overqualified for their position and therefore underpaid for the qualification, they are not able to pay off the loan but have to continue to make payments, unable to pay off the loan due to their lower income. ~8% tax
So we keep encouraging more and more students to go to uni until the government finally accepts it's mistake and caves. At the end of the day I've always been poor, and had nothing. A loan that expires in 30 years or when I die is frankly not something I'll ever worry about. From the government killing off our steelworks, industries, and manufacturing, to them placing the burden of education costs on the young, to them turning homes into over-inflated asset classes, to them introducing debt based financing and credit cards. All of it is the biggest "I told you so!" that the lower classes ever had. London, is where the wealth now resides. It's in the bankers, accountants, and lawyers. Turns out when you reduce your nation to an entirely white collar services economy, and a shelf stacking, burger flipping economy, then there's no actual wealth at all. Welcome to the Dead Pledge nation where homes are tombs, health is sickness, debt is wealth, and wombs are profitable.
The problem with the UK tax system is that there are intentionally loopholes in the system for the highest earners, Like capital gains being taxed signifiicantly lower, which is how most multimillionaires earn their income, not via a paid wage. the system is intentionally complex to allow those with the knowhow or the money to skirt around certain rules, whilst the common man gets told otherwise.
Our income tax system is bizarre and an incoherent mess because it was designed by politicians who are more interested in headlines and votes than making tax simpler. There is no economic justification for phasing out the tax free allowance, If I was in charge of tax law I would make the following changes almost immediately: 1. Merge income tax and employee national insurance contributions into a single tax. Of course that means pensioners will pay more (they do not currently pay NIC) but that could be compensated by increasing the state pension. 2. Remove the tapering of the tax free allowance. 3. Go back to the time when income tax bands were 0%, 20% and 40% - with the merger of NICs it would become 0%,33% and 50% and the 50% band would kick at a higher level say £75k 4. A single tax free allowance that would apply, at the taxpayer discretion, to income or capital gains or a combination. Then I would equalise the rates of CGT and income tax
Thanks for doing a video on this. So many people are oblivious or in denial about marginal tax rates and simply thinking those people are rich tax them more, meanwhile the politicians and actual rich are laughing at how they’ve pitted the middle classes against each other.
It’s not just the tax system. It’s the entire country. Chalk it up to no written constitution and people still (for some unknown reason) thinking they are ‘exceptional.’
They need to do more for people with families. You may have one high earner and one very lower earner. But because of the one high earner you may miss out of childcare support meaning your worst off by a significant amount when you compare another family who have the same household income but its more balanced.
The UK tax system is one of the reasons why we're facing problems today. Unfortunately, none of the politicians are focusing into making the tax system simple to understand. People talk about the lack of productivity and ambition to work even harder. How are you gonna achieve this if the tax rates are too high and too complicated. There needs to be a complete overhaul of the tax system and keeping tax rates down.
The key term here is “tax system”. And the point is: there is none. Not only in Britain, our (Czech) one is just as weird. And the reason is: taxes are introduced and cut not as a systemic mechanism, but as a way to score political points. Basically to buy votes. Everywhere, that’s no secret…
It's deliberately multi-layered, obfuscated, and with so many different tax rates, designed to squeeze as much money out of every person in the country who isn't sitting in the Houses of Parliament.
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I think it should have mentioned the extremely generous tax rebates on pensions. This video seems to suggest that high income people pay a lot of taxes.
@finnle5432 Do you mean "can use pensions to defer income. So you are taxed when you consume the money rather than earn it. Which seems economically literate."?
The UK tax system is overly complex with a reliance on "computerisation" to sort out the complexities of calculations. It also suffers from "fiscal lag" where tax allowances and band boundaries remain more or less constant in cash terms, which has the effect of bringing more people into higher rate tax bands as time goes on. Add to this politicians ill thought out publicity stunts for a headline - David Cameron and the Child Benefit claw back springs to mind, and the result of this over many years is that you end up with a complex system. As Mrs Thatcher understood, a system that appeared to be reasonably simple and fair which did not take more than 50% of your income in tax would raise far more for the Treasury than higher and higher tax rates that were the norm in the 1960s and 70s. However the complexity problem has been compounded by the massive rise in the amount of concealed wealth and income that has been accumulating in tax havens and appears to be taxable nowhere ; - which has affected every country, Any future UK tax system has to be based on the principal that if you have a British passport or if you are resident in the UK, you have a responsibility to pay a fair amount of UK tax on your income and assets - worldwide - taking account of taxes due in other countries. One point about the marginal tax/NI rates is that if you factor in benefit clawbacks for the lower paid, then the marginal rates of tax and NI combined with benefit clawback can be even higher than 67%.
5:30 for those only listening and not watching the video (dunno how you would read this comment tbf) council tax value is on the value of the property in 1991. £320k for a property in 1991 was pretty big, so it’s not quite as clear cut as Jack is making it. E.g my parents detached house in a rural turned suburbia town in Sussex are just one band above my 2 bed flat in Surrey. Both were built after 1991 so the value is notional.
Governments need to learn to spend within the budget without borrowing from the reserve bank, but they want to educate us the people to spend withing our budgets.
From what I have seen, Council tax on new homes is bonkers. One bed flats in band F or higher, even though they are only worth 200k today. Total nonsense and may discourage people buying new builds.
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Here in NZ our tax system is arguably not weird enough. It’s too simple and leads to bad incentives and big drops in tax take when the economy slows. We only have income, corporate, sales, and some (minor) excise taxes. We don’t have any capital gains tax or estate taxes both of which would improve equity.
There's also a graduate tax (not actually called this but is effectively what it is) whereby you pay 9% of everything earned above 29k toward student loan repayments over a 30 year period until its cleared or wiped. To add to the complexity, this depends on when you started the course as there are different repayment plans based on this and where you live as there are also different rules in Scotland, Wales & NI with the devolution powers. Basically it's a complex mess.
You do business, you know paying tax is nothing major. Doing tax is. Paying tax is not painful. Paying the backlog and fine and fee and interests on all three, that's painful. To be fair, the West as a whole tend to be like that. It's the reason I don't do business in the west at all, and focus on Asia, SEA and Africa, because paying the government is easy, and they don't do stupid things too often.
The other discrepancy is that you have to pay taxes individually and not as a married couple. So if a family earns 100k from one person you pay more tax than 2 people earning 50k each.
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Why is it that income tax jumps from 20% to 40%? Why is there no bands in between? Surely that would make it fairer as you can have more bands at more levels
Council tax isn't progressive at all. Progressive doesn't mean that richer people pay more in absolute terms than poorer people; progressive means that richer people pay a higher percentage of the total value of their property/income/whatever. People with expensive houses pay a smaller percentage of the value of their houses than people with cheaper houses, therefore council tax is a regressive tax.
You're also missing the free childcare removal which is an effective tax rate of over 100% on incomes between £100k and ~£130k for a single child (depending on your local nursery costs). It literally means one is better off turning down promotions....
Taxes purposely done in such a way to confuse and obscure the real numbers, especially in a country where maths is not its strong point. Besides personal taxes like income tax, national insurance, council tax, road tax, inheritance tax etc you get loads of other indirect taxes like VAT, insurance premium tax, excise duties (alcohol, tobacco, gambling, fuels), stamp duty, property taxes. This coupled with massive rents, transport costs and childcare, doesn't leave much in terms of expendable income compared with other developed nations. And my main issue is that after you pay so much in taxes you hardly get anything back in terms of policing, health service...etc
I'm a person that is in that 100 - 125k income bracket quite regularly, and honestly at that point, it's extra money but its more beneficial to put it in pension or charities to claim tax relief on that additional pay. At the end of the day being in that position is just being well off more so than others, and I honestly can't stand people that are in similar situations complain that things are unfair when you're literally in the top 5% of earners in the country, if you wanted to benefit more, moving further out from the city would instantly save more money since the majority cost is housing. If people can't manage their finances at that level of income, then the state shouldn't be subsidising them for poor monetary skills.
It's not about not making ends meet, it's about having fair taxation and providing the right incentive to people. A 70% marginal rate that drops at higher earnings is crazy. Having that also be the same point where free childcare is removed is counterintuitive. It encourages people to earn less so their take home is more!
I also earn around that bracket and you have it the wrong way round. If I as a tax payer need to make changes to my lifestyle at that level of income to seek optimum tax rates then that is wrong. The state works on behalf of us not the other way around. We’re taxed at such a level compared to other earners that we should be seeing benefits of doing so but we are not.
@@eugeneagyeman1 no you shouldn't get greater benefits just because you pay more tax. The country should, not you vs some other taxpayer. You aren't entitled to more help from the police than anyone else. However, it's crazy if the progressive tax rate doesn't increase logically by tax bracket and has a dip in it now, that's weird and illogical. It's truly mind blowing. And the fact the highest bracket starts at such a low amount is also very weird when there are people who earn much more.
Fully agree! If you're blowing most of a £100k plus salary, then you either have a cocaine and alcohol problem, or you're trying to live like a billionaire instead of knowing your actual level of wealth. Poor financial choices and wearing wealth badly isn't something that should ever be rewarded. As for needing benefits on £60k a year the same applies. Lower your expenditure on shoite you know is a luxury you don't need. But nah, people will still class things like netflix and disney+ as essential costs, or their vape sticks, or the ineffecient car that eats up fuel like candy. Everyone's sense of values and actual value is entirely eroded. And that won't change until people start saying "How much?" "I'm not paying that!" "We don't need that!" "I can live without that!". Greed, convenience, and laziness. And we'll not go into why childcare is a problem. Turns out once you monetize disposable nappies and human needs, then you have people over a barrel. Nothing props up banks and corporations like babies and mortgages. Welcome to the Dead Pledge nation. Where debt is wealth, and life is death, homes are tombs, and wombs are profitable.
@@angryherbalgerbilwhen you earn less money in your pocket for having a higher salary the system is broken. If you have young kids then the £100k hard cut off means you literally have less money despite a higher salary, and if you have 2 kids getting 30 hours a week childcare is going to take £20k+ of salary (£120k) just to get back to where you would be at £99k salary due to childcare. Literally zero point in taking that extra £20k. So people throw it into pensions where it's not taxed at all.
The people who made it are usually rich and want to stay that way. Though I will admit the additional problems of the UK having so many archaic laws that have never been properly overhauled doesn't help.
Just a reminder that the top tax rate used to be 90%, during the 1950s and 1960s, a time when we had very good economic growth. Then in 1971 is was brought down to 75%., but kept even higher for investment income. People in these comments are talking as though 40% or 50% were an unusually high marginal rate.
6:28 change “press can prove” to “press can claim” - this takes into account the very rich press owners making real people believe they will be affected too, when in reality they won’t
Counting phase outs as a change in marginal tax rate isn't a good way to understand what is happening, as it mixes elements of the effective tax rate with the actual marginal tax rate. If you're going to look at effective tax rates it is better to do the work of actually looking at the effective tax rates.
1) if you earn over 100K with a young family. You can earn (pound in uour pocket) less than someone of the same situation but earning less than 100K. All because you lose all childcare and taxfree childcare benefits. 2) I do not understand why private medical insurance is not provided with a tax benefit, it is counted towards taxable income. Surely you want to provide more incentive for employees to go private... 3) We have a high tax burden system with a lot of waste, indecision and not much to show for all the trillions of taxes the government take
So in regards to property taxes, he said someone with a £320,000 house pays the exact same as someone with a £10,000,000 house. Is it just a flat tax? Because if it’s the same percentage, then the person with the mansion is still paying more in taxes than someone with a £320,000 house.
We have council taxes which I believe may be similar to property taxes but are certainly unique & of course complex. They're set rates you pay per year for what band your property is in, not a % of the property value. And these are not set nationwide, each band is set by the local council and can vary. For example, a property worth over £320,001 in London would be in band H and cost £4072. A property located in the same area but worth 4x the value would still pay the same council tax rate of £4072. The bands are always the same (A-H) but the amount you pay depends on what the council decides to charge. There might be a cap on how much they can charge but even I don't know that.
I think, at a certain point, you *do* want to discourage some people from working more hours. That opens up job opportunities for others, and those lower income people need the money more.
@@Darren-i1w no, people who view tax as punishment are being incredibly simplistic about the world. Taxes are born out of two simple ideas: 1) that life can be hard and unexpected stuff happens, but having a community and common resources to rely on helps everyone manage things better. And 2) that it's unfair to ask someone with very little to give the same amount as someone with a lot, if I have £10 and you have £1, both of us donating 50p impacts you much more heavily than it impacts me, so it's fairer if everyone donates according to how much they can give. That's it, that's the whole point. It's just a legally mandated piggy bank we all donate into, and society had generally agreed that how much you give is in line with how much you have. Viewing taxes as a punishment ignores the fact that the money collected using the system goes towards helping people afford costs they might never have been able to.
@Imperial_Squid I don't care about society, if someone can't afford something then that is their problem, they are probably lazy anyway I should not have to pay more so others have a easier life Society only helps the dregs of society at the expense of decent people
The UK takes far more tax from high earners than most comparable nations and those with the lowest income also pay less. CGT and business taxes are largely aligned with other countries to remain competitive. The UK Is in a difficult position because reforming our tax system in a way which would increase certain tax rates to make the system more reasonable overall would make us less competitive - unless we increased tax on the lowest earners which would be very unpopular. Or alternatively we allow the reforms to decrease taxes overall, but that would largely benefit higher income people and would require cuts to spending, which also wouldn't be popular with voters.
government should not take out any benefits from anyone according to the income level. Someone at 100k doesn't mean he's very well off so he don't need to have any benefit, maybe he's the only earner in the family, maybe he have debt to payback, maybe need extra cash to take care long term disease, if the government can take out this nonsense marginal tax rate things will be much easier for everyone to manage themselves.
There’s a buzzing coming from your microphone or audio kit! You can eliminate this using a simple EQ and tuning down the frequency of the buzz, or some AI-based tools will do this for you.
You should have included losing 15 hours of childcare at 100k that's over 100% marginally. It puts me in a weird scenario of wanting to earn more to pay off a mortgage that's going to jump from £1k to £2.5k, but turning down work because it'll tip me over 100k and I'll take home less overall if that happens. I've accepted that the politicians want me to spend more time at home while my son is in nursery and encourage my wife, who's spent time raising our lovely children, to work harder.
When I work I pay tax When I use by take home pay to buy stuff, I pay tax When I turn on the lights I pay tax When I buy petrol or alcohol I pay tax on top of tax When I watch TV I pay tax When I take a flight, even UK to UK domestic, I pay tax When I put my money in the bank, the government wants a cut on the interests so I pay tax. After paying god-knows how many years of NI and pensions, I retire. But government be like I'm above some thresholds so I pay back a big chunk of it as tax. Finally, I die. But government be like I can't take my riches to the grave so I still pay tax.
The point about high marginal tax rate discouraging work is completely bogus and have been disproven in numerous economics studies. One effect that may account for "the ineffectiveness of high marginal tax rate to discourage work" may be that wage rise is exponential - when you earn £15/h, you'd be happy to get one more ½£ (less than 4%), especially if it's taxed at 28%, but it you earn £200/h your next pay jump won't be 1£ - you won't bother with a less than 10~20% pay rise - regardless of how it's taxed, it's going to be a lot of money. Also at these levels pay bumps are never about putting in extra hours and are most often recognition for good productivity and discouraging leaving and you are never expected to need more personal expenditure to allow for the extra pay.
Not sure I agree from personal experience. The people I met from Norway usually work until they hit the diminishing returns part and then quit and start their own company. This isn't really discouraging working, but it's also not amazing for companies to lose their most hardworking employee because they physically cannot pay them more.
@vezokpiraka I'm not familiar with the Norwegian tax regime, but another issue is that at high income levels it is open advantageous to shift your income from "work based" income - that is taxed very high even at low income levels - to "capital based" income that is often taxed at the lowest rate on the economy - so a person whose skills are very much in demand will want to form their own company - they can then move some their (normally not compensated) expenses to the company, such as transportation, pay themselves low salary and pull most income as dividends (that are taxed as capital gains). Where I live this tax loophole was closed by having owner dividends classified as work income, but many places still have this loophole.
@vezokpiraka taxes are complicated and there are various ways high earners can game the system, that are too numerous and complicated than a RUclips comment thread can handle.
@@vezokpiraka looking at the Norwegian tax authority website, the highest tax bracket is 55.8% - that is very reasonable: I pay 54% here and I'm on the third highest tax bracket. So I can't account for your experience, except to comment again that taxes are complicated and wage incomes are always taxed the highest and if you have the financial capabilities to game the system you almost always can get more coins in your hand by not pulling a high salary and instead doing something else.
Hey, at least when you go into the higher tax bracket, your salary remains the same throughout the year. In Poland IT VARIES, as you "run out" of your allowance, which makes calculating net pay a PITA. You can't beat that level of stupid.
This is bonkers.
Paying taxes on benefits instead of just reducing the benifit paid...
That's just extra work for no reason.
It's equivalent. The entity giving you tax credits and benefits is also taxing your income. It is not more work for your employer or you yourself. The accountant software, or the Tax Return software, just works it out for you.
I still think it's a bonkers way to calculate tax owed or benefits owed.
It'll be to skew some statistics somewhere, "most tax income we've ever had", whilst in reality, they practically paid themselves...
The rationale I think is so even people on benefits are entitled to national insurance (state retirement pension)
It doesn't work like that. Taxes and benifits shouldn't depend on eachother.
The reason is to keep certain bureaucrats employed.
The tax system of the UK seems especially designed to pick the pockets of the middle and upper middle classes. The 62% tax band between 100k and 125k, cleverly disguised as the "personal allowance taper" is especially egregious and is the reason I tend to go into an incoherent rage about taxes. When you factor in that you instantly lose tax-free childcare and 30 hours free childcare the moment you earn a pound over 100k (no taper at all), the effective marginal tax becomes greater than 100%, so you're actually worse off than if you earn under the threshold. That's why when my kid was in nursery, I deliberately had to contribute large sums of my pay into my pension to stay below this crucial threshold. Everyone lost out as a result of this maddening corner case - I lost out on disposable income, the government lost out on income tax revenue, and the economy lost out because that money is being saved instead of spent.
Then there's the fact that the taxation system heavily penalises families with a stay-at-home parent and a high-earning breadwinner because there's no joint assessment unlike other countries. A friend of mine is in the worst possible situation as he earns roughly 100k from consulting while his wife doesn't work. Overall they get taxed significantly more than a couple earning 50k each, and also miss out on child benefit, despite both situations having the same amount of gross income coming into the household.
Finally, other countries provide plenty of deductions that just don't exist in the UK. Things like mortgage interest or public transport commuting costs are deductible in many other European countries but not here. Why? Commuting by bus or train is an expense of doing a job, it's a publicly funded service and it encourages people to not drive which has social benefits, you shouldn't have to pay income tax on the cost of it.
Glad it’s not just me who goes into an incoherent rage about taxes in this country! At least take comfort in the fact that it’s a 69.5% tax trap up here in Scotland - I’d save thousands in taxes a year by living south of the border!
It’s all for the finance focused part of the economy the uk is heavily reliant on. Can’t be 2nd largest services exporter without some shenanigans.
@@blackhavaianas I've heard of quite a few Edinburgh-based finance folk who immediately upped sticks and moved south of the border the moment the tax changes were announced, either to Berwick or all the way to London. Not because it massively impacted them but because it sent a signal on which way the tax winds were blowing in Scotland.
@ Makes sense, I will likely move to the US in the next 1-2 years, as that’s an option with my job. I love this country but feel I can’t really progress financially with the current tax levels.
Deductibility of mortgage interest is an insanely bad idea. It is a direct transfer of tax revenue to banks.
I'm glad someone is talking about how garbage the UK tax system is. Needs a full revamp.
The problem is (as the video has stated), it will always have winners and losers across all economic backgrounds.
For example, pensioners will be furious if council tax rates have changed.
The working class will be furious as if they live in somewhere like Putney, they could be charged a wealth tax for having a house that is over £1 million in value.
Revamp, or Reform?
(One of the thing Reform is running on is tax simplification)
If only we voted in a party called reform that wanted to reform the system.
@reheyesd8666 please dont do that reform are just tories in a different cloth
Entire bureaucracy needs a revamp, it's a 1000 years of tinkering and loopholes, tonnes of things kept in just for tradition sake and permits and laws that simply do not keep with the times as updating them sends out a cascade of nonsense as it's all this interconnected mess. Dump the entire thing, start again.
You’ve also missed out the loss of the free childcare hours once you reach £100k which result in a >100% marginal tax.
Cry me a river. If someone or even a household is making over £100k then they don't need childcare benefits.
@@dealbreakercPeople really need to get out there head that 100k makes you wealth. In today's society you are very much close to anyone else in the lower bands. I've lived in Japan and 100k there warrants the comment you made but in the UK 100k means nothing today.
But that's like three times median household income in the UK?
@@tomlxyz and so they don't matter? The 2% who make up over 30% of our national income tax should just get fucked with a 70% marginal tax rate. God forbid that they want children and effectively pay over 100% taxes between 100k and ~130k
@@tomlxyz that doesn't mean 100K in London is rich, it just means people in the provinces are not as well off as they should be, despite the lower cost of living. If to have that job and kids you need to have the same disposable income as someone living in Leeds, you're not better off financially. The weather isn't so much better either, and while you have more access to museums, it doesn't improve your local cinema or Sainsburys.
5:40 I think this quite misleading. As stated in the previous slide, council tax is based on the value in 1991, or an estimate of what that would have been. The Southend property may be worth 321k now but that is not a band H property at all.
The message that council tax is regressive is true but this is not illustrating it properly. The main point of council tax being regressive that it isn't proportional to the property price - a small house in the north will be paying a higher percentage of the property's value in council tax than a large house in london.
I was thinking the same thing... A few errors popping up on this channel unfortunately
@@mrgreen2461really big error they are making. You won’t get a £321k house in Southend in 1991
The video got Council tax pretty wrong. The bit they got right was the bands, but each Council sets what rate should apply to homes in each band in their area. So whilst it is true that a £321,000 house (at 1991 values) in Southend would be in band H just as a £38m mansion in Kensington that provides no information as to what the owners will actually be paying - the owner of the Southend property might be paying more than the owner of the Kensington property
At least most of our taxes are automatic rather than having to file them manually like they do in the US. But Yes the UK system should definitely be simplified from the Government Admin side and made fairer for poorer households
We pay far more taxes, and get nothing in return, but atleast its taken from us automatically!
@@jgomo3877that’s a good point but I think it’s because the our tax revenue is less than the us
The UK doesn't pay more in taxes than the US (except for a few states) once you add in the fact they have to pay for health insurance.
uhh, i'd much rather the US system, UK taxes are too punitive and are mostly squandered by bureaucrats or used to fund stuff in foreign countries. It's not as bad in the US.
@@jgomo3877 "nothing in return" do you mean that literary or are you trying to be sarcastic? What do you think your taxes do?
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The other thing about the child benefit is that it based on one parent's income, meaning one parent earning 80k gets nothing but if two parents are on 59k they get the full benefit.
It also gets worse if you have a student loan as you lose another 9% over a certain threshold.
tbf if it were free it would mean extra taxes for everyone sooo
Students chose to do that it’s not a tax it’s a payment for a commodity
@@UnlikeMitchelluniversity education benefits the whole economy, not just those who attend university.
An effective 9% graduate tax that anyone who isn’t PAYE gets to opt out of , is in no way fair or makes sense.
@@migsteele University does to a point benefit the whole economy, the UK currently produces far too many graduates!
@@silliestsususagest3276 I don't disagree, we should be giving student loan relief/reductions to STEM, doctors, teachers, etc, people that require and use their degrees. Those going 'for the experience', eg doing modern art should pay their own way.
Meanwhile, the US says "Hold my beer"
The 60% tax at £100k - £125k is absolutely maddening.
Make the 45% band at £125k into a 50% band and get rid of that 60% band (scrap the personal allowance taper) entirely.
The amount of mental effort people paid 95-140k spend managing this issue is inefficient for country's productivity. I just pensioned the F out of everything above 100k, so retired at 44. A more sensible tax scheme and I'd have saved weeks of mental effort / planning and worked another few years
You want tax cuts for the super rich?
That would mean an effective tax rate of 52% when you include 2% NIC, so more than half of your income would be lost to tax. I can tell you I wouldn’t work for that.
@@tasin2776Lol if you think earning above 100k makes you “super rich”.
@@tasin2776 100K isn't the super rich, that's like a middle manager with a bit of overtime and a company car
Combined with the recent video on land tax, this just proves that the tax system in the UK is designed to get money for the average Joe and leave alone the rich. Not surprising as the UK keeps voting in rich people with the expectation they care about poor people.
But Keir Starmer's father was a tool maker! 🤣😂🤣
@angryherbalgerbil but what is Keir stamer himself? It has to start somewhere and there is always the exception.
Weird is the wrong word.
Immoral could be the word.
Call it what it is, a scam.
Thanks
UK tax system is crazy, completely disincentivises working or starting businesses.
Only persons who benefit the overcomplicated system are accountants
Yup it's the administratum.
A system of complexity, built intentionally to serve a centralised beaurocracy and impoverish the majority.
Council tax needs to be updated, and include land values so that it applies to empty plots. Why are we charging businesses a fortune in business rates when people who waste valuable land are charged nothing!?
My mates business rate is £1 on his kebab shop,
If an empty plot of land is generating no income, how should it be taxed? If your logic applied to objects, the owner of the Mona Lisa would probably pay £1b a year just to own it. It doesn't really make sense.
@@mandrakejake by updated he means someone else's pays more
@mandrakejake the thing is with owning land that is different to the mona lisa is that taking up space to just leave vacant in a valuable area is a cost on the rest of society and they should compensate for it.
Something not mentioned here is loss of certain benefits at specific earnings, too. You mentioned the loss of the personal allowance at £100K+, but what wasn't mentioned was that going over 100k also IMMEDIATELY loses you free childcare hours and childcare contributions. This isn't just a deterrent - two working parents with a child in childcare, with one of them being a high earner, is actively WORSE OFF taking a higher pay at certain points. The only remedy is to reject any pay rises, or immediately plow any extra earnings into a SIPP, which isn't exactly hugely stimulating for the economy.
Benefits are applied at a household level, but their criteria is based on the individual. This isn't the '50s where every mum is homebound - we live in a society where both parents are EXPECTED to work, and I imagine the economy relies on this to some extent. This is the other part that doesn't make sense.
All of this wouldn't be so bad if it felt like our hard earned money was actually being used wisely - but after 14 years of Tory rule, it's been consistently spunked up the wall, and people have very little patience for it now.
Worrying about what happens for people earning over £100k isn't worth thinking about. The median income in the UK is sitting around £35k or £36k.
@@dealbreakerc
Earners over 100k don't make up as many people as they should, but they pay a disproportionate amount of taxes. Several of my friends just went to Dubai once they hit that level 😢
@@danielb7006good for your friends. I frankly don't give a fuck about people earning that much complaining about taxes when millions more people work just as long as just as important jobs and struggle to make ends meet.
Oh that is so sad, rich people really have it too hard.
@NanoLT it is a big deal when high earners are disincentivised from earning more and contributing further the economy. Not even to mention that inflation and fiscal drag means £100k isn't worth nearly as much anymore.
These high earners are not the enemy - they are far closer to the median earner than they are the super wealthy.
Because it is tax ordinary working person, while allowing the establishment and rich to pay nothing
To add to complexity it’s different in Scotland
Almost everything in the UK is. UK usually works on one system in England and Wales, another system in Scotland and a third system in Northern Ireland.
@@alt_zaq1_esc but in many ways you could have a better quality of life here depending where in scotland
To be fair Scotland does not matter at all
@georgesotiriou7051 so doesn't England
I'll never complain about the complexity of the US tax system again haha. That's insane, it literally looks like something Thatcher would've crafted out of pure spite for the middle class.
are you sure about that council tax point? - the house valuation is based on 1991 prices, yet the South End house at 321k is clearly modern value.
No the house prices are over-inflated.
My parents home is currently worth over £100k. They paid £5k for it back in the late 70s.
With inflation it should be worth around £25k in today's market.
And it's just a semi-detached in Yorkshire. London property values are inflated even higher.
Homes should be homes not "asset classes" used to make up for a lack of genuine wealth and a cash racket to prop up the banks whilst tying people into debt slavery to buy a home marketed at 20 times it's actual value.
God forbid people keep their own money.
The system isn't "poorly designed", it's designed just exactly how people who can afford to bend the ear of MPs want it designed.
Council tax needs to be updated in line with today’s house prices.
That would involve hitting London house prices, so just like Land Value Taxation it isn't likely to happen anytime soon.
@@loc4725 Then they need to lower house prices in line with council tax bands. That would also address the problem of everyone under the age of 30 (including myself) not being able to get their own home.
On a cost neutral basis. At each local council level. So won't be much impact at all. Won't result in south subsidising Sunderland more than does at moment. But positive outcome that shuts up the "why using 1991" squeal
@@leonbanks5728 *"Then they need to lower house prices in line with council tax bands."*
As someone who's older let me give you a leg up on how this works.
For decades governments of both colours have been trying to pump up house prices, mainly so that Boomers who had not saved for retirement (and there's *a lot* of them!) could instead sponge off later generations by buying up houses, pricing out the young and living off the rental income. This inevitably meant that money which should have gone into the productive economy though shares and investments instead went into pushing up house prices. So fast forward and now we're once again in the situation where banks are vulnerable and any shocks to house prices will consequently cause catastrophic damage to the economy. And the growth which we should now be seeing hasn't happened because unlike in other countries we didn't invest in ourselves.
One thing you should absolutely be doing though is being sympathetic to and supporting those Boomers who are living alone in 3-4 bed houses whilst on pensions of up to £51,000 a year and who, thanks to Labour won't be getting the winter fuel allowance. Don't worry about the genuinely poor ones though; they're guaranteed social housing because of their age and will still get the allowance as it's now means-tested. It's only the 'poor' entitled wealthier Boomers who are living beyond their means who are going to freeze to death (allegedly) this winter, and as you've probably noticed there's a lot of them about.
@@danielwebb8402 It’s either they do that or they put the house prices down to the 1991 council tax band levels, which would help anyone under the age of 30 (me included) get their own house.
It gets even worse for Inheritance tax - I am in my late 60s and working do pay 20 or 40% on my income but since I am in the band that losses my tax free allowance do when I die this earned money will be taxed at 40% and I will loose 40% allowance - so absolutely no point in working
Move to another country and work there
No I’ll just stop working…
Student loans should also be discussed due to people having a lot borrowed in student loans and the interest rates on those loans. People struggle to pay off these loans in their working lives. The loan turns into an ~8% increase in your marginal tax rate throughout your working life rather than a loan you will pay off. Considering that a large amount of the working population is overqualified for their position and therefore underpaid for the qualification, they are not able to pay off the loan but have to continue to make payments, unable to pay off the loan due to their lower income. ~8% tax
So we keep encouraging more and more students to go to uni until the government finally accepts it's mistake and caves.
At the end of the day I've always been poor, and had nothing.
A loan that expires in 30 years or when I die is frankly not something I'll ever worry about.
From the government killing off our steelworks, industries, and manufacturing, to them placing the burden of education costs on the young, to them turning homes into over-inflated asset classes, to them introducing debt based financing and credit cards.
All of it is the biggest "I told you so!" that the lower classes ever had.
London, is where the wealth now resides. It's in the bankers, accountants, and lawyers.
Turns out when you reduce your nation to an entirely white collar services economy, and a shelf stacking, burger flipping economy, then there's no actual wealth at all.
Welcome to the Dead Pledge nation where homes are tombs, health is sickness, debt is wealth, and wombs are profitable.
The problem with the UK tax system is that there are intentionally loopholes in the system for the highest earners, Like capital gains being taxed signifiicantly lower, which is how most multimillionaires earn their income, not via a paid wage.
the system is intentionally complex to allow those with the knowhow or the money to skirt around certain rules, whilst the common man gets told otherwise.
Multimillionaires are normally non dom or have left for Dubai and the like years ago
The whole thing was designed to keep the rich people rich by keeping the poor people poor.
Our income tax system is bizarre and an incoherent mess because it was designed by politicians who are more interested in headlines and votes than making tax simpler.
There is no economic justification for phasing out the tax free allowance,
If I was in charge of tax law I would make the following changes almost immediately:
1. Merge income tax and employee national insurance contributions into a single tax. Of course that means pensioners will pay more (they do not currently pay NIC) but that could be compensated by increasing the state pension.
2. Remove the tapering of the tax free allowance.
3. Go back to the time when income tax bands were 0%, 20% and 40% - with the merger of NICs it would become 0%,33% and 50% and the 50% band would kick at a higher level say £75k
4. A single tax free allowance that would apply, at the taxpayer discretion, to income or capital gains or a combination. Then I would equalise the rates of CGT and income tax
You forgot the pension taper that is equivalent to 70% income tax rate
Companies & individuals pay Accountants hundreds of thousands for a reason.
Turning assets into expenses is a lucrative business.
Most pay them because they are clueless about tax
Thanks for doing a video on this.
So many people are oblivious or in denial about marginal tax rates and simply thinking those people are rich tax them more, meanwhile the politicians and actual rich are laughing at how they’ve pitted the middle classes against each other.
How do you define middle class?
@@wildfire9280 you just proved his point 😂
It’s not just the tax system. It’s the entire country. Chalk it up to no written constitution and people still (for some unknown reason) thinking they are ‘exceptional.’
They need to do more for people with families. You may have one high earner and one very lower earner. But because of the one high earner you may miss out of childcare support meaning your worst off by a significant amount when you compare another family who have the same household income but its more balanced.
The UK tax system is one of the reasons why we're facing problems today.
Unfortunately, none of the politicians are focusing into making the tax system simple to understand. People talk about the lack of productivity and ambition to work even harder. How are you gonna achieve this if the tax rates are too high and too complicated.
There needs to be a complete overhaul of the tax system and keeping tax rates down.
Got a copy of Too Long for Christmas. Thanks for a great year of TDLR on RUclips and a great magazine too.
The key term here is “tax system”. And the point is: there is none. Not only in Britain, our (Czech) one is just as weird. And the reason is: taxes are introduced and cut not as a systemic mechanism, but as a way to score political points. Basically to buy votes. Everywhere, that’s no secret…
It's deliberately multi-layered, obfuscated, and with so many different tax rates, designed to squeeze as much money out of every person in the country who isn't sitting in the Houses of Parliament.
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I think it should have mentioned the extremely generous tax rebates on pensions. This video seems to suggest that high income people pay a lot of taxes.
@finnle5432
Do you mean "can use pensions to defer income. So you are taxed when you consume the money rather than earn it. Which seems economically literate."?
The video suggests most taxes are paid by high income people because it's a fact.
The UK tax system is overly complex with a reliance on "computerisation" to sort out the complexities of calculations. It also suffers from "fiscal lag" where tax allowances and band boundaries remain more or less constant in cash terms, which has the effect of bringing more people into higher rate tax bands as time goes on. Add to this politicians ill thought out publicity stunts for a headline - David Cameron and the Child Benefit claw back springs to mind, and the result of this over many years is that you end up with a complex system. As Mrs Thatcher understood, a system that appeared to be reasonably simple and fair which did not take more than 50% of your income in tax would raise far more for the Treasury than higher and higher tax rates that were the norm in the 1960s and 70s. However the complexity problem has been compounded by the massive rise in the amount of concealed wealth and income that has been accumulating in tax havens and appears to be taxable nowhere ; - which has affected every country, Any future UK tax system has to be based on the principal that if you have a British passport or if you are resident in the UK, you have a responsibility to pay a fair amount of UK tax on your income and assets - worldwide - taking account of taxes due in other countries. One point about the marginal tax/NI rates is that if you factor in benefit clawbacks for the lower paid, then the marginal rates of tax and NI combined with benefit clawback can be even higher than 67%.
5:30 for those only listening and not watching the video (dunno how you would read this comment tbf) council tax value is on the value of the property in 1991. £320k for a property in 1991 was pretty big, so it’s not quite as clear cut as Jack is making it.
E.g my parents detached house in a rural turned suburbia town in Sussex are just one band above my 2 bed flat in Surrey. Both were built after 1991 so the value is notional.
Governments need to learn to spend within the budget without borrowing from the reserve bank, but they want to educate us the people to spend withing our budgets.
From what I have seen, Council tax on new homes is bonkers. One bed flats in band F or higher, even though they are only worth 200k today. Total nonsense and may discourage people buying new builds.
Plus new builds are total sh...
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Here in NZ our tax system is arguably not weird enough. It’s too simple and leads to bad incentives and big drops in tax take when the economy slows. We only have income, corporate, sales, and some (minor) excise taxes. We don’t have any capital gains tax or estate taxes both of which would improve equity.
There's also a graduate tax (not actually called this but is effectively what it is) whereby you pay 9% of everything earned above 29k toward student loan repayments over a 30 year period until its cleared or wiped. To add to the complexity, this depends on when you started the course as there are different repayment plans based on this and where you live as there are also different rules in Scotland, Wales & NI with the devolution powers. Basically it's a complex mess.
You do business, you know paying tax is nothing major. Doing tax is. Paying tax is not painful. Paying the backlog and fine and fee and interests on all three, that's painful. To be fair, the West as a whole tend to be like that. It's the reason I don't do business in the west at all, and focus on Asia, SEA and Africa, because paying the government is easy, and they don't do stupid things too often.
its simple "stop the poor from becoming rich"
The other discrepancy is that you have to pay taxes individually and not as a married couple. So if a family earns 100k from one person you pay more tax than 2 people earning 50k each.
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All the bots are upvoted
Why is it that income tax jumps from 20% to 40%? Why is there no bands in between? Surely that would make it fairer as you can have more bands at more levels
Asking what would make it fairer got us in this mess to begin with. We need simplification, not ever more tax bands.
Because UK taxes are inherrently classist. They're meant to discriminate against some and coddle others.
2:50 istg THIS is the thing that WAY too many people don't understand.
*Income tax needs to be reformed*
Council tax isn't progressive at all. Progressive doesn't mean that richer people pay more in absolute terms than poorer people; progressive means that richer people pay a higher percentage of the total value of their property/income/whatever. People with expensive houses pay a smaller percentage of the value of their houses than people with cheaper houses, therefore council tax is a regressive tax.
This is what happens when you sream "eat the rich" for too long 😂😂😂
You're also missing the free childcare removal which is an effective tax rate of over 100% on incomes between £100k and ~£130k for a single child (depending on your local nursery costs). It literally means one is better off turning down promotions....
Thank you great video I have shared it
Merry Christmas Joyous Jack
Taxes purposely done in such a way to confuse and obscure the real numbers, especially in a country where maths is not its strong point. Besides personal taxes like income tax, national insurance, council tax, road tax, inheritance tax etc you get loads of other indirect taxes like VAT, insurance premium tax, excise duties (alcohol, tobacco, gambling, fuels), stamp duty, property taxes. This coupled with massive rents, transport costs and childcare, doesn't leave much in terms of expendable income compared with other developed nations. And my main issue is that after you pay so much in taxes you hardly get anything back in terms of policing, health service...etc
It’s giant mess with too many different rules, reliefs and allowances. Successive Govts have made our tax code the longest in the world!
I'm a person that is in that 100 - 125k income bracket quite regularly, and honestly at that point, it's extra money but its more beneficial to put it in pension or charities to claim tax relief on that additional pay.
At the end of the day being in that position is just being well off more so than others, and I honestly can't stand people that are in similar situations complain that things are unfair when you're literally in the top 5% of earners in the country, if you wanted to benefit more, moving further out from the city would instantly save more money since the majority cost is housing.
If people can't manage their finances at that level of income, then the state shouldn't be subsidising them for poor monetary skills.
It's not about not making ends meet, it's about having fair taxation and providing the right incentive to people.
A 70% marginal rate that drops at higher earnings is crazy. Having that also be the same point where free childcare is removed is counterintuitive. It encourages people to earn less so their take home is more!
I also earn around that bracket and you have it the wrong way round. If I as a tax payer need to make changes to my lifestyle at that level of income to seek optimum tax rates then that is wrong. The state works on behalf of us not the other way around. We’re taxed at such a level compared to other earners that we should be seeing benefits of doing so but we are not.
@@eugeneagyeman1 no you shouldn't get greater benefits just because you pay more tax. The country should, not you vs some other taxpayer. You aren't entitled to more help from the police than anyone else.
However, it's crazy if the progressive tax rate doesn't increase logically by tax bracket and has a dip in it now, that's weird and illogical. It's truly mind blowing. And the fact the highest bracket starts at such a low amount is also very weird when there are people who earn much more.
Fully agree!
If you're blowing most of a £100k plus salary, then you either have a cocaine and alcohol problem, or you're trying to live like a billionaire instead of knowing your actual level of wealth.
Poor financial choices and wearing wealth badly isn't something that should ever be rewarded.
As for needing benefits on £60k a year the same applies. Lower your expenditure on shoite you know is a luxury you don't need.
But nah, people will still class things like netflix and disney+ as essential costs, or their vape sticks, or the ineffecient car that eats up fuel like candy.
Everyone's sense of values and actual value is entirely eroded.
And that won't change until people start saying "How much?" "I'm not paying that!" "We don't need that!" "I can live without that!".
Greed, convenience, and laziness.
And we'll not go into why childcare is a problem.
Turns out once you monetize disposable nappies and human needs, then you have people over a barrel.
Nothing props up banks and corporations like babies and mortgages.
Welcome to the Dead Pledge nation. Where debt is wealth, and life is death, homes are tombs, and wombs are profitable.
@@angryherbalgerbilwhen you earn less money in your pocket for having a higher salary the system is broken. If you have young kids then the £100k hard cut off means you literally have less money despite a higher salary, and if you have 2 kids getting 30 hours a week childcare is going to take £20k+ of salary (£120k) just to get back to where you would be at £99k salary due to childcare. Literally zero point in taking that extra £20k. So people throw it into pensions where it's not taxed at all.
Say the UK Tax System is weird, yet fail to mention Scotland has a different Tax system. The things you guys get wrong are just amazing sometimes.
I get the feeling this is convoluted and a mess to help benefit the 1%.
That’s a little conspiratorial, can’t a tax system be stupid and convoluted because the people who made it are?
The people who made it are usually rich and want to stay that way.
Though I will admit the additional problems of the UK having so many archaic laws that have never been properly overhauled doesn't help.
@snomcultist189Do not blame things that can be explained by incompetence on maleficence.
No they just don't have the nerve to change tax rates so they tinker around them which results in the absurd situation we are in
It would take a bold electorate to elect a bold government to overhaul it and overall spending.
Just a reminder that the top tax rate used to be 90%, during the 1950s and 1960s, a time when we had very good economic growth. Then in 1971 is was brought down to 75%., but kept even higher for investment income. People in these comments are talking as though 40% or 50% were an unusually high marginal rate.
There was no captial gains tax back then
@@jamesholt4449less than one percent of people had stocks back then
Yeah and everyone was converting income to capital gains
6:28 change “press can prove” to “press can claim” - this takes into account the very rich press owners making real people believe they will be affected too, when in reality they won’t
Counting phase outs as a change in marginal tax rate isn't a good way to understand what is happening, as it mixes elements of the effective tax rate with the actual marginal tax rate. If you're going to look at effective tax rates it is better to do the work of actually looking at the effective tax rates.
It seems to me that British taxes work the way antitax people in the US think taxes work.
And I thought the U.S. income tax system was complicated. And I can't believe there is an upper limit on property value for property tax.
Taxes shouldn't be this complicated.
Massive tax simplification is a need. It'd cost nothing and it'll increase growth and efficiency
Those tax rates are actually higher in reality because student loans account for another 9% (which most people now have)
This is batshit crazy... I am glad I declined the job I was offered
Filling Rachel Reeves black hole is stickier than first imagined.
No rate should ever go more than half. Pointless to complain about low productivity when gov has all these incentive levers to male it happen
And the government wonder why the economy isn’t growing smh
1) if you earn over 100K with a young family. You can earn (pound in uour pocket) less than someone of the same situation but earning less than 100K. All because you lose all childcare and taxfree childcare benefits.
2) I do not understand why private medical insurance is not provided with a tax benefit, it is counted towards taxable income. Surely you want to provide more incentive for employees to go private...
3) We have a high tax burden system with a lot of waste, indecision and not much to show for all the trillions of taxes the government take
So in regards to property taxes, he said someone with a £320,000 house pays the exact same as someone with a £10,000,000 house. Is it just a flat tax? Because if it’s the same percentage, then the person with the mansion is still paying more in taxes than someone with a £320,000 house.
We have council taxes which I believe may be similar to property taxes but are certainly unique & of course complex. They're set rates you pay per year for what band your property is in, not a % of the property value. And these are not set nationwide, each band is set by the local council and can vary. For example, a property worth over £320,001 in London would be in band H and cost £4072. A property located in the same area but worth 4x the value would still pay the same council tax rate of £4072. The bands are always the same (A-H) but the amount you pay depends on what the council decides to charge. There might be a cap on how much they can charge but even I don't know that.
I think, at a certain point, you *do* want to discourage some people from working more hours. That opens up job opportunities for others, and those lower income people need the money more.
need to use KISS - keep it simple - first 30K income should be taxed free and then say 10% for the next 20K, etc
Because of a Medieval Mentality. British lawmakers has an adversion of de word "change".
Why do families with 3+ children still pay any taxes? They shouldn't
So the more kids you have the less you pay into a system that has to provide for those kids?
Yeah sounds right...
Tax is a punishment for daring to better your self
Do you use sandpaper to get your brain that smooth or have you always been like this?
@Imperial_Squid with isn't it a punishment
@@Darren-i1w no, people who view tax as punishment are being incredibly simplistic about the world.
Taxes are born out of two simple ideas: 1) that life can be hard and unexpected stuff happens, but having a community and common resources to rely on helps everyone manage things better. And 2) that it's unfair to ask someone with very little to give the same amount as someone with a lot, if I have £10 and you have £1, both of us donating 50p impacts you much more heavily than it impacts me, so it's fairer if everyone donates according to how much they can give.
That's it, that's the whole point. It's just a legally mandated piggy bank we all donate into, and society had generally agreed that how much you give is in line with how much you have.
Viewing taxes as a punishment ignores the fact that the money collected using the system goes towards helping people afford costs they might never have been able to.
@Imperial_Squid I don't care about society, if someone can't afford something then that is their problem, they are probably lazy anyway
I should not have to pay more so others have a easier life
Society only helps the dregs of society at the expense of decent people
@DaddyBiscuits that's why they should be scrapped
Any chance we could get a video like this for the US?
It seems Europe in general punishes success with taxes
They should most definitely simplify all of this because wtf
The UK takes far more tax from high earners than most comparable nations and those with the lowest income also pay less. CGT and business taxes are largely aligned with other countries to remain competitive.
The UK Is in a difficult position because reforming our tax system in a way which would increase certain tax rates to make the system more reasonable overall would make us less competitive - unless we increased tax on the lowest earners which would be very unpopular. Or alternatively we allow the reforms to decrease taxes overall, but that would largely benefit higher income people and would require cuts to spending, which also wouldn't be popular with voters.
government should not take out any benefits from anyone according to the income level. Someone at 100k doesn't mean he's very well off so he don't need to have any benefit, maybe he's the only earner in the family, maybe he have debt to payback, maybe need extra cash to take care long term disease, if the government can take out this nonsense marginal tax rate things will be much easier for everyone to manage themselves.
There’s a buzzing coming from your microphone or audio kit! You can eliminate this using a simple EQ and tuning down the frequency of the buzz, or some AI-based tools will do this for you.
3:21 the jump from 0% to 28% is way too high. And the skip from 42% to 47% is way too low.
You should have included losing 15 hours of childcare at 100k that's over 100% marginally. It puts me in a weird scenario of wanting to earn more to pay off a mortgage that's going to jump from £1k to £2.5k, but turning down work because it'll tip me over 100k and I'll take home less overall if that happens.
I've accepted that the politicians want me to spend more time at home while my son is in nursery and encourage my wife, who's spent time raising our lovely children, to work harder.
Tax system in any democracy is about securing the right keys. As per rules for rulers.
When I work I pay tax
When I use by take home pay to buy stuff, I pay tax
When I turn on the lights I pay tax
When I buy petrol or alcohol I pay tax on top of tax
When I watch TV I pay tax
When I take a flight, even UK to UK domestic, I pay tax
When I put my money in the bank, the government wants a cut on the interests so I pay tax.
After paying god-knows how many years of NI and pensions, I retire. But government be like I'm above some thresholds so I pay back a big chunk of it as tax.
Finally, I die. But government be like I can't take my riches to the grave so I still pay tax.
I think tax is too low, tax should go up so we can all feel safer and happy
The point about high marginal tax rate discouraging work is completely bogus and have been disproven in numerous economics studies. One effect that may account for "the ineffectiveness of high marginal tax rate to discourage work" may be that wage rise is exponential - when you earn £15/h, you'd be happy to get one more ½£ (less than 4%), especially if it's taxed at 28%, but it you earn £200/h your next pay jump won't be 1£ - you won't bother with a less than 10~20% pay rise - regardless of how it's taxed, it's going to be a lot of money. Also at these levels pay bumps are never about putting in extra hours and are most often recognition for good productivity and discouraging leaving and you are never expected to need more personal expenditure to allow for the extra pay.
Not sure I agree from personal experience. The people I met from Norway usually work until they hit the diminishing returns part and then quit and start their own company.
This isn't really discouraging working, but it's also not amazing for companies to lose their most hardworking employee because they physically cannot pay them more.
@vezokpiraka I'm not familiar with the Norwegian tax regime, but another issue is that at high income levels it is open advantageous to shift your income from "work based" income - that is taxed very high even at low income levels - to "capital based" income that is often taxed at the lowest rate on the economy - so a person whose skills are very much in demand will want to form their own company - they can then move some their (normally not compensated) expenses to the company, such as transportation, pay themselves low salary and pull most income as dividends (that are taxed as capital gains). Where I live this tax loophole was closed by having owner dividends classified as work income, but many places still have this loophole.
@vezokpiraka taxes are complicated and there are various ways high earners can game the system, that are too numerous and complicated than a RUclips comment thread can handle.
@@guss77 the Norwegian tax system has super high marginal tax rates (up to 90% I think) that's why I used it as the best example.
@@vezokpiraka looking at the
Norwegian tax authority website, the highest tax bracket is 55.8% - that is very reasonable: I pay 54% here and I'm on the third highest tax bracket. So I can't account for your experience, except to comment again that taxes are complicated and wage incomes are always taxed the highest and if you have the financial capabilities to game the system you almost always can get more coins in your hand by not pulling a high salary and instead doing something else.
Sounds a lot like America’s tax system.
Hey, at least when you go into the higher tax bracket, your salary remains the same throughout the year. In Poland IT VARIES, as you "run out" of your allowance, which makes calculating net pay a PITA. You can't beat that level of stupid.