Tax in UK

[Lopéz]

Whilst we have higher tax here, I have to say the childcare situation is really good. I almost feel like having kids just to take advantage of how good it is compared to the UK.

Childcare in Nurseries and Kindergartens, for children between the ages of 0 and 6 here is €72.33 per month, unless you are a low income family, in which case this is paid by the government.

If you opt for a private Kindergarten, this is also subsidised by the government to a maximum of €635.44 per month.

Bit different to the UK.

 

[tlrBeta]

Whilst we have higher tax here, I have to say the childcare situation is really good. I almost feel like having kids just to take advantage of how good it is compared to the UK.

Childcare in Nurseries and Kindergartens, for children between the ages of 0 and 6 here is €72.33 per month, unless you are a low income family, in which case this is paid by the government.

If you opt for a private Kindergarten, this is also subsidised by the government to a maximum of €635.44 per month.

Bit different to the UK.

Everyone wants that here also, as well as cheaper rent / restricted areas (I know Sweden have this model)

However, for the most part nobody seems to happy to pay for it and it's always something "for the rich" to resolve.

 

[Richie]

It's quite easy to have a low effective tax rate ("ETR") if "income" isn't income in the correct sense of the word.

Of course but then I believe that the income 8n question should be taxed as income rather than a dividend... Avoidance is not illegal but that doesn't mean it's always right.

 

[sigma]

Oh I'm not speaking about my side of the fence - we're doing ok despite having kids. It doesn't matter how much your prepare, the cost of doing stuff with kids is always somewhat shocking! However for many the desire of children outweighs the sacrifices needed to be made - but then they also don't realise how much things can cost when you do have children.

In a truly pragmatic, clinical world, we'd all make far better decisions, but humans are humans! We do things from the heart as often as we do things from the head.

Yeah but in the scenario you're describing the parents have to accept the outcomes from choices and adjust accordingly. Or maybe they should have been able to see it coming after the first kid. Sure, they might have to save up for a holiday but that's what their life decisions have led them to. I don't feel particularly sorry for them.

 

[Pudney]

Of course but then I believe that the income 8n question should be taxed as income rather than a dividend... Avoidance is not illegal but that doesn't mean it's always right.

You completely miss my point. What is called "income" is often actually a capital gain. The maximum you can pay on a share gain is 20%, and if that gain is large then simple mathematics will bring the average ETR down because... that's how maths and averages work. This has literally nothing to do with avoidance, and the fact people always default to "tax avoidance" is why it's nearly impossible to have a constructive conversation about it.

 

[Freefaller]

Yeah but in the scenario you're describing the parents have to accept the outcomes from choices and adjust accordingly. Or maybe they should have been able to see it coming after the first kid. Sure, they might have to save up for a holiday but that's what their life decisions have led them to. I don't feel particularly sorry for them.

No I don't feel sorry for them. Nor should we. However when you compare the quality of childcare and the cost of it outside of the UK and the provision for better work life balance for parents it is a stark contrast.

But as you say you make the decision and if it means sacrificing the Bentley or the 5* holidays then so be it! Jocularity aside, earning more money doesn't suddenly make having children easier. Unfortunately all holiday prices go up during school holidays which is a shame. I dare say they'd get more people travelling if they kept the prices flatter, but I guess that's the point they don't want people travelling.

So again, you create a two tier system where you have people who earn a decent living that can save for holiday and those that just scrape by every month and it doesn't matter if you're earning 50,000 or over 100,000. The same situation can apply to either of them depending on the situation.

Lopez's example is a case in point. I'd rather pay higher taxes and have better access to childcare, healthcare and public services than the mess we're in now.

 

[Richie]

You completely miss my point. What is called "income" is often actually a capital gain. The maximum you can pay on a share gain is 20%, and if that gain is large then simple mathematics will bring the average ETR down because... that's how maths and averages work. This has literally nothing to do with avoidance, and the fact people always default to "tax avoidance" is why it's nearly impossible to have a constructive conversation about it.

I didn't miss your point. My point is it's wrong in the way the tax system is structured

Perhaps changing this so that everyone pays tax on all their income at the current PAYE income rate tax bands would address this.

Earn £20k in salary plus £500k in shares = taxed at PAYE bandings as if earned £520k salary

That's what I am referring to.

 

[413x]

Oh I'm not speaking about my side of the fence - we're doing ok despite having kids. It doesn't matter how much your prepare, the cost of doing stuff with kids is always somewhat shocking! However for many the desire of children outweighs the sacrifices needed to be made - but then they also don't realise how much things can cost when you do have children.

In a truly pragmatic, clinical world, we'd all make far better decisions, but humans are humans! We do things from the heart as often as we do things from the head.

If people made the decision on having kids purely from practical standpoint (ie no feelings about it).. The population of the western world would collapse.


Business proposition..
"raise a child"

Costs
-you spend 100-200k+ bringing up this child
-The bills in the first few years are 1000s a year just for child car
-your free time = 0
-swap your 2 seater for this wagon
-.. List continues


Pros
-might look after you when I your older
-list ends.



Without the feelings and instincts side.. Its a bad investment!

 

[413x]

I do wonder if there should be a charge for some services, with exemptions of course. Not much, but a little. I'm sure those services would appreciate direct payment also. E.g. £5 for a GP visit, £10 for an A&E visit.

Slippery slope to full private.

Current method is long waiting lists = those who can afford it go private.

At same time the NHS is still available. But you might die waiting for your turn.

 

[Freefaller]

If people made the decision on having kids purely from practical standpoint (ie no feelings about it).. The population of the western world would collapse.


Business proposition..
"raise a child"

Costs
-you spend 100-200k+ bringing up this child
-The bills in the first few years are 1000s a year just for child car
-your free time = 0
-swap your 2 seater for this wagon
-.. List continues


Pros
-might look after you when I your older
-list ends.



Without the feelings and instincts side.. Its a bad investment!

Hehehe. Yeah that's what I mean. You don't have kids with that in mind.

 

[Pudney]

I didn't miss your point. My point is it's wrong in the way the tax system is structured

Perhaps changing this so that everyone pays tax on all their income at the current PAYE income rate tax bands would address this.

Earn £20k in salary plus £500k in shares = taxed at PAYE bandings as if earned £520k salary

That's what I am referring to.

Then stop calling things tax avoidance if you know the true position. It's misleading and frankly disingenuous of you. Especially as you try to sit on a moral high horse.

If you don't like the rate of CGT then say so.

 

[Richie]

Then stop calling things tax avoidance if you know the true position. It's misleading and frankly disingenuous of you. Especially as you try to sit on a moral high horse.

If you don't like the rate of CGT then say so.

Fair enough but no need to get your knickers in a twist... Almost sounds like you have skin in the CGT game.

 

[Bear]

I didn't miss your point. My point is it's wrong in the way the tax system is structured

Perhaps changing this so that everyone pays tax on all their income at the current PAYE income rate tax bands would address this.

Earn £20k in salary plus £500k in shares = taxed at PAYE bandings as if earned £520k salary

That's what I am referring to.

But in your scenario, someone pays PAYE on their wages and puts their disposable into investments. They get lucky and those investments turns into the £500k you mention, you are then saying they should pay PAYE on that money again instead of the growth (gain) on that money which seems plain ridiculous.

 

[413x]

Hehehe. Yeah that's what I mean. You don't have kids with that in mind.

Its why we aren't having kids. The instinct and paternal drive isn't in me. So I see it from that "logical" point. It's why it's the only thing I my life I've been sure about. So all I see is that con list. And it's long! Very very long.

 

[Rai200]

100% - high earning PAYE is basically not fun. This is why many people opt for shares and other packages instead.

Not fun?

Even at the "60%" tax bracket, based on an average work week etc. someone earning 100k is making over £20 an hour after tax, at the high end (£125k) it's £25.60 an hour after tax.

Average hourly wage in the UK is about £16-17 per hour before tax. It's kinda hard to feel sorry for the ~3% of people this affects.

 

[Richie]

But in your scenario, someone pays PAYE on their wages and puts their disposable into investments. They get lucky and those investments turns into the £500k you mention, you are then saying they should pay PAYE on that money again instead of the growth (gain) on that money which seems plain ridiculous.

No.

I said PAYE bandings to try and keep it simple but I realise this may have had the reverse.

To be clear, when I say PAYE bandings, I am referring to the 20%, 40%, 50% etc bandings and rules that are setup under current PAYE rules depending on the salary you are paid in a job.

I believe the gains on investments, which are currently paid via CGT, should be included in your income as if it was a salary and therefore tax paid on "total salary"... Gains only, not initial capital e.g

Salary from employment - 50k
Gains from investment - 30k
Total income - 80k
Tax level payable - higher rate tax

Salary from employment - 10k
Gains from investment - 500k
Total income - 510k
Tax level payable - upper banding tax rules


At the moment, people can be paid a pittance and take the rest in shares thereby avoiding limiting their tax burden... THAT'S disingenuous

We all have differing opinions on this based on our current situations of course.

 

[Freefaller]

Not fun?

Even at the "60%" tax bracket, based on an average work week etc. someone earning 100k is making over £20 an hour after tax, at the high end (£125k) it's £25.60 an hour after tax.

Average hourly wage in the UK is about £16-17 per hour before tax. It's kinda hard to feel sorry for the ~3% of people this affects.

I'm not asking for people to feel sorry for them, but earning this magical 100k isn't a panacea of lavishness and luxury.

 

[aspiring]

Not fun?

Even at the "60%" tax bracket, based on an average work week etc. someone earning 100k is making over £20 an hour after tax, at the high end (£125k) it's £25.60 an hour after tax.

Average hourly wage in the UK is about £16-17 per hour before tax. It's kinda hard to feel sorry for the ~3% of people this affects.

This is the bit I am not getting either. Some are saying 100k is not sufficient or a good wage which is baffling.

I mean your calculations are based on 60% but actually it can be done for lower no doubt

 

[Rai200]

This is the bit I am not getting either. Some are saying 100k is not sufficient or a good wage which is baffling.

I mean your calculations are based on 60% but actually it can be done for lower no doubt

Right?

And that's only between 100-125k. Earning before that are at a much higher rate.

 

[CapitalOne]

Re the 100k paradigm.

It is a good salary. When you get there though, not as good as you’d think (is what I am hearing).

There does come a point where even at the 45% band it’s a lot of tax, but it’s also a lot of take home.

The 100 to 125k personal allowance taper isn’t widely known (outside these forums of course!) so catches people out which adds to the sense of surprise.