I think flat tax would be a start... as opposed to the "progressive" tax that punishes people for being successful by taking a higher proportion of their income and is ultimately the cause of the issues in the op.
NHS Doctor Pensions - For the few, not the many
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I think flat tax would be a start... as opposed to the "progressive" tax that punishes people for being successful by taking a higher proportion of their income and is ultimately the cause of the issues in the op.
No, The Tax just limits the amount that you can put into your pension plan.
Pension plams are not the only investments that are possible, nor are they the only tax friendly one. (Though they are currently the most tax friendly one)
Carrying on working but without increasing ones pension contributions/entering a higher tax rate band is not going to make anybody worse off. Just that you wont be as well off as the increase in pre-tax income might have suggested.
Now, you might feel that entering a higher rate tax band means that there is no point in making the extra effort for relatively little additional gain, And that I can understand, but it is also a different matter
But think what it would have been like back when the UK was a pre-Thatcher socialist paradise with marginal tax rates that under some circumstances exceeded 90%
Man of Honour
That's not what other people have said, particularly the person I replied to (eviled), who specifically stated that going over the limit for a year (by any amount) would result in an additional £10,000+ tax that year and probably more extra tax when they retire.
I'm wondering if this whole thread just more of the weirdly common ignorance of how taxation works, in which people believe that going into a higher tax band means the higher rate of tax is applied to the whole income and not just the part above the cutoff point.
Soldato
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It might work like this in private sector, but it is an absolute ball ache within a govt pension scheme to limit your contributions, you can't make reduced contributions, you are either in or out, if you could limit conributions there would be no issue.
It means flat rate taxes and universal benefits, working together to remove the help/punish dichotomy of the current setup, both ensuring the state is providing a minimum standard of living to everyone, not punishing the successful and not trapping the low/no earners in a benefit trap where working is pointless.
I advocate a ubi via a negative income tax implementation.
Soldato
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Negative income tax as in a large personal allowance, or direct back payment of income tax to people on low income?
OK, Not sure about how the public sector schemes work I accept, But does this mean that effective after-tax income actually goes down after a certain point, or simply that the effective marginal taxation rate is so high that people do not really want to be bothered doing the extra work to receive it?
Negative income tax as in universal payment, no formal personal allowance, flat tax rate, and the interaction between them creating an effective personal allowance.
Is a spreadsheet example I did years ago.
https://docs.google.com/spreadsheet...j2E2rjulugi6MMLUvpB0QiRJ92E/edit?usp=drivesdk
It ensures that the impact of any tax or benefit change voted for by the public can't be used to punish people, due to equal treatment. You can also add in additional variables such as disability or child enhancements by adding them to the payment amount which again serve to give more money, either in the form of a larger net payment or a larger effective personal allowance.
Simple, easy to administer, consistent and fair.
Soldato
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The latter.
Or worse, you've done the work, made contributions throughout the year, the contributions are based upon a percentage of a gross amount you've made as self employed contractor to NHS services, not the amount you actually get paid, the contributions are taken each month before the money comes to you, as it would be with an employee, and you've in essence no idea what the 'scheme' has done in the background until about 6-9 months after the tax year is over when they send you a letter, or in fact 2 letters as they've you in 2 schemes, and you've to make a self assessment now as you're over the allowance.
You find out months late you're over the allowance, and then have a tax bill to pay, in addition to the tax you've paid, without realising you were 'working too much' and going over your limit.
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The system is such an arse, and with the change from the 1995 to 2015 scheme, and our own little hilarious lack of assembly in Northern Ireland, I received figures from 2014 to 2018 in almost 2019.
Having been given no indication I was remotely close to any contributions limit.
So i can opt out, or I can do less NHS work, but I can't mitigate it in any other fashion, by lowering contributions, or doing other things with the money.
Soldato
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So a 35% tax rate, with a 7500 given to all.
Would this repalce the state pension out of interest?
Does it combine NI and Tax?
I love the simplicity of it.
Replaced NI and income tax, applies to all forms of income (so replaces capital gains tax etc reducing the methods available for tax avoidance), replaces pensions etc as well.
The figures were just examples, but the system also allows for sincere and honest discussion of tax and spending, as we can move away from the current setup where people vote for changes that push the impact onto 'others' (whether that is benefit claimants or 'the rich'). Instead, it becomes a discussion around what level of taxation and universal benefit is required to meet the spending plan, and is that acceptable to the country, or does the country need to think about what its spending or doing.
It should be coupled with signficant reforms to social housing, social care etc as well.
It would be a huge change, and probably not that politically popular initially (most current political parties are grouped around vested interests and punishing others if we're honest), but it results in equal treatment under the law, while ensuring that those who need support get it, and those who can afford to make large (but not disproportionate) contributions are required to do so. It also ensures that any work will always make you better off than not doing it, and stops the horrendous benefit trap that so many people are stuck in where they have to turn down additional work etc because the impact on them is negative overall.
I will add that there is an ideological slant to my position that the government should treat people equally. We don't seek popular concensus for equal treatment under the law for race, gender etc, so I fail to see why, when it's enshrined in human rights law already, we happily discriminate against people based on earnings or property. It is not the states place to do that IMO.
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That would leave some serious shortfalls in funding though wouldn't it?
For example the bet365 ceo who paid herself a 250 million bonus. She'd have probably paid ~110-120million tax. With your suggestion that tax payment would be 87million.
Soldato
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In her case yes, but let's face it, most people on such incomes funnel money every which way, and don't pay themselves much more than a basic salary.
Anyway to another question.
If one goes over the annual allowance, one can use unused portions of the previous 3 years pension allowance.
So if I go over in 2016/2017, can I used that years allowance plus what remains from 2013/2014+2014/2015+2015/2016, oldest first, keeping the left overs from 2014/2015+2015/2016 plus the zero (from 2016/2017) for the year 2017/2018?
As I said, the numbers were examples. There would have to be a discussion (as to be honest there should have been a long time ago) about state spending and taxation to work through the balance of spending vs taxation, but this is a positive in my view. Current discussions of this nature are highly polarised, partisan and effectively involve people demanding things and that other people suffer the cost of it. This system removes that drive. You can't demand that person x contributes a higher proportion of income to fund your pet project, and person y can't demand that your benefit is cut without resulting in a higher net tax take for person y.
Democracy should never be about using the power of the state to enforce discrimination on others.
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If this is aimed at me, there is no actual allowance. There is a point where your tax contributions and payments to you balance and you become a net payer of tax, but that's not the same thing.
Soldato
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No, your system is quite clear.
I meant the current system with allowances into pension pots, as I am trying to work out when it is best to stop NHS work.....
unfortunately.
that's not the case, sorry if I made it seem that way.
Any extra over £40,000 in pension pot growth annually you lose tax relief on - this seems fair as it stop the wealthy stashing their end of career earnings tax free into pensions
What's cause all the issues is that any extra £1 over the 40k mark reduces your 40k tax free limit by 50p, tapering it back down to an bottom limit of 10k
ie.
if you pay 50k one yea, rather than the extra over 40k being liable for tax they recalculate your new tax free annual allowance as 35K and you now need to pay tax on the 15k pension contributions.
This is all done retrospectively and accounts for previous 3 years also
This is why people have been left with surprise £10k + tax bills.
(this might seem obvious for people who do self assessment of have limited companies but come outs the blue for someone who has been on PAYEE all their life)
bottom line still being, no financial incentive to work any extra time, and for the high earners at the end of their careers an actual incentive to drop work or more into the private sector.
Soldato
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I thought the taper kicked in with earnings over 110K up to 150k, rather than with pension contributions over the 40k?
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You are mixing up with the tapered annual allowance.
If you are over the annual allowance of £40k (plus the unused for the previous 3 years, then you will be taxed on that amount at your notional tax rate).
However, if your threshold income is over £110k and your adjusted income is over £150k, then your annual allowance of £40k is reduced by £1 for every £2 over £150k (up to a maximum reduction of £30k).
The issue for very high earners (ie for people with a adjusted income of over £210k) they only have a £10k annual allowance, which is very easy to go over
Soldato
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Just so people know of individual amounts.
Someone of let's say 22 years standing making pension contributions deducted by NHS at source, prior to pay, of approximately £13500 in a year to their NHS scheme, administered over the 2015 scheme at £10500 and the 1995 scheme at £3000 due to added years, will have effected according to government projections a pot growth of £44500. Without previous years allowance to draw upon will be due to pay an additional £1800 in tax. So 2.5% or so additional tax, simply to get the career average NHS pension that you can't reduce contributions to.
Some of this is due to how they due to how they administer the pension system, and likely wouldn't happen if they had not changed the pension system, splitting it into 2 schemes.
I feel it rather unfair that paying 13k into something gets you a bill of 2k, as they make the 13k to be worth 45k.
TLDR:
Pay of 75K, take home of 43K, asked for an extra 2K, a fair slap in tax changes.
Someone of let's say 22 years standing making pension contributions deducted by NHS at source, prior to pay, of approximately £13500 in a year to their NHS scheme, administered over the 2015 scheme at £10500 and the 1995 scheme at £3000 due to added years, will have effected according to government projections a pot growth of £44500. Without previous years allowance to draw upon will be due to pay an additional £1800 in tax. So 2.5% or so additional tax, simply to get the career average NHS pension that you can't reduce contributions to.
Some of this is due to how they due to how they administer the pension system, and likely wouldn't happen if they had not changed the pension system, splitting it into 2 schemes.
I feel it rather unfair that paying 13k into something gets you a bill of 2k, as they make the 13k to be worth 45k.
TLDR:
Pay of 75K, take home of 43K, asked for an extra 2K, a fair slap in tax changes.