With the exception of the >£125k earners who got an actual tax cut, how are higher threshold earners hit harder than those on the lower tax bandings but above the benefits threshold?
Autumn Budget 2022
- Thread starter Hagar
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With the exception of the >£125k earners who got an actual tax cut, how are higher threshold earners hit harder than those on the lower tax bandings but above the benefits threshold?
I would check the IFS statement but the number of people now in the higher rate band is going to increase considerably. It will be over 1m increase in that band now.
Not sure the >£125k earners got a tax cut. Theirs went up as well of course.
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Agreed but they are not in the higher band due to a lowering of the band limit. They are, or will be, in the higher band due to an increase in income which makes them better off than when they were in the lower band.
If the higher band limit was reduced (say to £35k) then, yes, I would agree with you but the higher band incomers have not been hit any harder than the lower band earners.
So I don't agree that higher band earners have been hit any harder than others.
Soldato
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Just a reminder that at 125k you’ve also lost your tax free allowance. I’d guess at 125k you’re effectively paying 45ish % tax on your total income. I know this hasn’t moved but still.
I’d say don’t be angry be grateful!
I’d say don’t be angry be grateful!
In real terms those thresholds have fallen considerably.
Ed Conway: Middle earners facing same tax hit as those on six-figures as autumn statement starts to unravel
The chancellor had said the biggest burden will fall on those with the broadest shoulders, but those earning £62,000 will suffer the same £1,600 extra in taxes as those earning £124,000.
Plus it’s all the losses in benefits that start to occur that hurt people too.
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Quite. You have to earn it to pay it. Higher bands only tax that portion of the earners, it’s not retrospective.
An old boss of mine when I was in sales always told people to stop moaning about the amount of tax they paid as it means they are earning a lot. (It was very variable, some months you’d earn £2k, others £8k so tax was all over the place).
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Ed Conway: Middle earners facing same tax hit as those on six-figures as autumn statement starts to unravel
The chancellor had said the biggest burden will fall on those with the broadest shoulders, but those earning £62,000 will suffer the same £1,600 extra in taxes as those earning £124,000.news.sky.com
Plus it’s all the losses in benefits that start to occur that hurt people too.
I've read the link you posted but, unless I missed it, they offer no explanation as to why someone on £62k will pay £1,600 more in tax.
If someone can detail where someone on the higher banding is paying more tax than they previously were on the same higher banding then I'm all ears.
Further details here https://www.resolutionfoundation.org/comment/autumn-statement-special/
It’s pretty clear as well as the IFS making it very clear that middle earners are ones being punished by this budget. As I mentioned above those thresholds are falling in real terms which is hurting people.
I see what they are saying and it is correct but I still don't see how higher rate tax payers are harder hit than lower rate tax payers which is what you suggested.
The crux of their argument is the fiscal drag which is essentially people paying more tax as the income tax thresholds are not changing but the salary they get does increase.
What it fails to to is balance this out with the fact that, should your salary stay the same, you won't pay any more tax at all.
In order for their "you will pay more tax" argument to be true, you have to get a pay rise. Now, yes, you pay more tax but you also still have a bigger income so the "squeeze" just doesn't hold up as you have more in your pocket even after paying more tax.
Edit: how does someone on £62k pay £1600 more tax in April 2023 than in March 2023 if salary remains the same?
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Soldato
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From what I can tell at a cursory their analysis is based on the freezing. So any payrise is taxed in full at their highest marginal rate.
40% plus NI (reduced)
Where as historically a % of this would have been tax free from an uplift in the tax free amount, and a percentage would have been lower rate, likewise an uplift in the 20% band. With only their amount above these combined being taxed at 40%
40% plus NI (reduced)
Where as historically a % of this would have been tax free from an uplift in the tax free amount, and a percentage would have been lower rate, likewise an uplift in the 20% band. With only their amount above these combined being taxed at 40%
I think you are treating it as total sums of money which is a very odd way to look at people’s incomes. I can understand that if someone is earning less they may feel that it is a nice problem to have if you have to pay more tax due to earning more. What’s the solution, make everyone earn exactly the same amount?
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Its absolute not relative.
The term harder hit will be different depending on your perspective.
We have been over the whats a high salary a few times and most people on £60k wont be living the life of luxury by the time they have done what the vast majority do in that circumstance and buy a decent house etc.
A few will live like they are a student still, I literally have a mate who does this, he still rents and lives with students in an old 6 bedroom house rented by the room, hes on 6 figure salary working at one of the Cambridge uni sites.
(Phd grad of chemistry specialising in lasers). I hate to think how much hes stashed away.
If inflation is 10% and you get a 10% pay rise your going to lose immediately 40% ignoring NI.
Someone on lower income may see more become taxable but that would be at 20%. But plus NI.
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I'm not following you so perhaps we are on cross purposes here.
You said:
Which suggests that those not on the higher band aren't hit as hard I questioned why you think higher rate tax payers are getting hit really hard when I can't see how.
You, and the links you posted, mention the bandings limits not being changed which will bring more people into the higher tax bandings.
My point is that, although that is true and the people changing bandings will pay more tax, they have to earn more money to do that.
If they earn more money then, even after the additional tax is taken, they still end up with more cash in their pockets than they previously did.
How does someone with more cash in their pocket get squeezed more than they did before?
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I think you need to define “squeezed” right?
Well we are certainly going around in circles. I think your idea of how tax should work is definitely not how it should work. Just because someone earns more shouldn’t mean they should just put up with paying more tax. I really don’t understand how that could be acceptable.
Of course but that's not what the report states.
It states that someone on £62k will pay £1,600 more in taxes than previously.... How?
Apologies, I didn't mean a tax cut, I meant a tax increase.. the level of income for upper limit was cut is what I meant
Yes but you are implying that because someone earns more than another they should not complain about having higher tax increases. Someone that earns £21k should not complain because someone else is earning £20k. They should be happy they earn more as they have more cash in their pocket.
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As said when I quickly looked I think they have pulled the projection of the future out so with inflation coming in the pay rises will be more heavily paid in tax.
Its the problem with these sorts of thing. I don't doubt its right for the scenario they have come up with, at the end of the day its simple maths.
1600 in tax at 40% is a payrise of 10%. IE someone on £60k now getting basically an inflationary rise will get £6k pay rise. 40% of that is £1600.
If they are spending the majority of their current income after tax then assuming they do have personal inflation of around 10% then they are going to have a larger gap in what their new costs are compared to someone who instead of earning £60k earns £30k.