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Staffing struggles caused delays in tax division

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50 minutes ago, timetraveler said:

Yes, they are, and they disproportionately pay tax.

What do you call a low income then ?

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On ‎11‎/‎20‎/‎2019 at 9:31 PM, timetraveler said:

They are instructed to try to maximize the amount of tax they can get and to minimize the amount given back by way of rebate. That means that even if their staff notice that a person is owed a rebate on previous years, the policy is that they would not go and rebate it and would leave the onus on the taxpayer to figure out they've been shortchanged. The majority of tax is targeted at the poor and low income earners. Most taxation is just theft to keep the civil servants' own salaries and pensions paid. It's a racket.

Rubbish.  High earners (except the very small number who benefit from the cap) pay a higher proportion of their income in tax.  We may not have a very high level of tax, but the system is largely progressive, with 0/10/20% rates depending on earnings.

And in my experience they simply want to get it right.  I recently received a rebate of overpaid NI dating back a few years.  I'd never have noticed myself, because their calculations seemed correct - I was just in the wrong bracket for part of my income.  They noticed, as part of a routine audit, and set the record straight very quickly.  And they also responded quickly to my emails.

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29 minutes ago, wrighty said:

Rubbish.  High earners (except the very small number who benefit from the cap) pay a higher proportion of their income in tax.  We may not have a very high level of tax, but the system is largely progressive, with 0/10/20% rates depending on earnings.

And in my experience they simply want to get it right.  I recently received a rebate of overpaid NI dating back a few years.  I'd never have noticed myself, because their calculations seemed correct - I was just in the wrong bracket for part of my income.  They noticed, as part of a routine audit, and set the record straight very quickly.  And they also responded quickly to my emails.

I’m not sure that’s strictly true @wrighty.

The tax system comprises 4 elements

1. income/direct taxes which is progressive, and where someone just over the tax free band and 10% band may pay a lesser percentage than someone earning twice what they earn. But that’s a result of tax free and lower rates.

2. N.I. Which is flat rate but regressive due to the cap on the employees higher earnings limit. In other words low earners pay a higher proportion than high earners.

3. Property taxes (rates) based on property value. Whilst high earners may live in higher rated homes the chances are that the proportion of income taken in rates is higher for lower income earners than higher.

4. indirect taxes such as VAT or duties ( consumption or expenditure taxes ) which are much more difficult to analyse as high earners may spend more on taxable items, but they may save, reducing their spend and take, or buy new, and more expensive,  cars - which might increase the proportion tax take over a second hand purchase, or buy more expensive alcohol - where duty ( but not VAT ) is a fixed sum and regressive, or with cigarettes it’s possible that low earners smoke more and raise the percentage of their income going in tax compared to high earners.

 

 

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1 hour ago, John Wright said:

I’m not sure that’s strictly true @wrighty.

The tax system comprises 4 elements

1. income/direct taxes which is progressive, and where someone just over the tax free band and 10% band may pay a lesser percentage than someone earning twice what they earn. But that’s a result of tax free and lower rates.

2. N.I. Which is flat rate but regressive due to the cap on the employees higher earnings limit. In other words low earners pay a higher proportion than high earners.

3. Property taxes (rates) based on property value. Whilst high earners may live in higher rated homes the chances are that the proportion of income taken in rates is higher for lower income earners than higher.

4. indirect taxes such as VAT or duties ( consumption or expenditure taxes ) which are much more difficult to analyse as high earners may spend more on taxable items, but they may save, reducing their spend and take, or buy new, and more expensive,  cars - which might increase the proportion tax take over a second hand purchase, or buy more expensive alcohol - where duty ( but not VAT ) is a fixed sum and regressive, or with cigarettes it’s possible that low earners smoke more and raise the percentage of their income going in tax compared to high earners.

 

 

I'm sure that's right John, but I was only talking about direct taxation, not property/VAT.  I said the system is largely progressive - I think that's still true for income tax and NI combined, but to be certain someone over the NI limit was not paying an overall lower proportion of their income as tax/NI compared with someone below it I'd have to do some illustrative calculations.

 

ETA - I've done the calculations.  Above the upper earnings limit for NI the marginal rate of tax is 21%.  At the upper earnings limit your total NI/Tax is 20.78%.  So the tax/NI system is progressive, just, right the way up to the tax cap.

Edited by wrighty
Calculations

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41 minutes ago, wrighty said:

I'm sure that's right John, but I was only talking about direct taxation, not property/VAT.  I said the system is largely progressive - I think that's still true for income tax and NI combined, but to be certain someone over the NI limit was not paying an overall lower proportion of their income as tax/NI compared with someone below it I'd have to do some illustrative calculations.

ETA - I've done the calculations.  Above the upper earnings limit for NI the marginal rate of tax is 21%.  At the upper earnings limit your total NI/Tax is 20.78%.  So the tax/NI system is progressive, just, right the way up to the tax cap.

I think the word 'largely' is doing a lot of work there.  For a salary of £25,000 you're already paying 14.34% of your salary in tax and NI, that rises to 17.12% for £30,000.  It creeps up to 20.59% for £40,000 and more or less stops there, only edging up microscopically.  Even at £878,250 which is equivalent to the tax cap (£175,000 income tax), it's still only 20.99%.  Basically it's a flat tax.

Of course once people start using the tax cap the percentage starts to plummet.  On £10 million the rate would only be 2.78% tax.

This is progressive only in the same way that the DoI is progressing with the Prom.

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4 hours ago, Roger Mexico said:

I think the word 'largely' is doing a lot of work there.  For a salary of £25,000 you're already paying 14.34% of your salary in tax and NI, that rises to 17.12% for £30,000.  It creeps up to 20.59% for £40,000 and more or less stops there, only edging up microscopically.  Even at £878,250 which is equivalent to the tax cap (£175,000 income tax), it's still only 20.99%.  Basically it's a flat tax.

Of course once people start using the tax cap the percentage starts to plummet.  On £10 million the rate would only be 2.78% tax.

This is progressive only in the same way that the DoI is progressing with the Prom.

I have to agree with Roger on this one.

The direct taxes are progressive up to £784 pw or 40,768 pa, then it all becomes a bit static.

I suggest you should include Employers NI as this is a tax cost of employing and employers will consider it in hiring decisions.

If you look at employee taxes alone then after £784, there is employee NI at 1% and IT at 20% ie  marginal rate of 21% (up to tax cap). Thus, we have marginal rates rising from 0% to 31% and then a flat marginal rate of 21%. That is progressive up to a point and then not so progressive.

If you include Employer NI,  then you eventually get to 12.8% Employer NI, 1% Employee NI and 20% Income tax. To get to this point combined marginal rates increase from 0% up to 43.8% and then flatten at 33.8%.

For people on circa 50k, the total average tax take is about 29% and this remains almost constant up to the cap.

 

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