Step one, get people to put more into pensions by savaging them on income tax if they don't. Step two, change the terms on pensions so that it gets taxed anyway, just later.

Isn't step one make people not work by savaging them on income tax, because who wants to bust their ass to break 100k when they're getting a 60% tax bill.

It looks like the highest tax bracket in the UK is at 45% and starts above 150k GBP.

On 150k GBP you would pay max 40%. Buuut let's say you make 200k,then some falls into the 45 bracket.

£83,934 taxes or an average tax rate of about 41.9%

Between 100K and 125K, you progressively lose the tax allowance, bringing your marginal income tax rate to 60%.

I didn't just dream this up. I literally just Googled a tax calculator and input 100k, 150k and 200k.

And your using out of date information. The upper tax bracket has been lowered to 125K and you also lose your personal allowance of 12.5K which is tax free, so you start paying tax on earning you didn't have to before.

Fair enough, that is possible. Maybe that calculator was outdated. Do you have a pointer?

Until then, I googled again and using this now, which should of course be up-to-date, shouldn't it (tax year 2022):

https://www.tax.service.gov.uk/estimate-paye-take-home-pay

Entering 150k, the result is Your estimated take-home pay for 2022 is £96,053 a year or in other words a 35.9% average tax rate.

It even specifically says on the bottom: Your tax-free allowance is £12,570

Mmarq is correct: https://www.gov.uk/income-tax-rates/income-over-100000

That gov.uk calculator is incorrect, which is unusual for gov.uk. It hasn't reduced the tax-free allowance to zero as it should for £150k. Most other online tax calculators do, so they show a lower take home amount.

The 60% that is discussed is the marginal rate in the band from £100k to £125k, not the average tax rate on all the income. It means: for each increase of £1000 in your earnings when your income is in that band, you pay £600 more tax.

I understand how tax brackets work and what a marginal rate is ;)

The original post I replied to first however does not seem to be aware of it. To quote the relevant part again:

    their ass to break 100k when they're getting a 60% tax bill.

No, you do not get taxed 60% once you reach 100k in income, not even in the UK, not even under the new rules that even the government's own calculator does not take into account ;)

That is specifically why I quoted the average tax rate too and not just the marginal rate. Now of course, w/ the reduction of the tax free amount at those incomes coming into effect, yes, in comparison to some other countries (and apparently previous rules), you do get taxed quite high. Now let's compare.

100k GBP ~= 166k CAD

Canada, cheapest province - Alberta. Average tax rate ~31%, marginal tax rate ~42%

Canada, expensive province - Quebec. Average tax rate ~38.5%, marginal tax rate ~50%

150k GBP ~= 250k CAD

Canada, cheapest province - Alberta. Average tax rate 35.4%, marginal tax rate 47%

Canada, expensive province - Quebec. Average tax rate 42.8%, marginal tax rate 53.3%

The only rate that really matters for what you have in your pocket in the end is the average tax rate. You could have a country with a 99% marginal tax rate in the highest bracket but a bracketing system in which 99% of the population never reach that bracket, so quoting the marginal rate is not very helpful except if you want to complain about taxes - or you make the 150 million at which that marginal rate might apply in this fictitious country ;)

While we're at comparing, Germany, a country with high taxes that 150k GBP is about 170k EUR and results in an effective tax of 43%.

Since apparently the government calculator is wrong for the UK and I only find broken ones myself, can you calculate the above w/ one that does things correctly and post for comparison?

If one wants to be precise, depending on your circumstances, earning an additional £ when you are making 99’999£ per annum has disastrous consequences.

As we said your marginal income tax rate goes to 60% until you start making £125K, when it drops to 45%. If you consider NI and student loans, your tax marginal tax rate could approach 70% in that bracket. At 100K you lose some means tested benefits, for instance free childcare, that in London may be worth in excess of £1500 per month. It means that somebody with a child making £100K is poorer than somebody with a child earning £75K (1500*12=18000 after tax, so 30K before tax at a 40% marginal tax rate).

In a place where the most miserable 2-bedroom flat cost in excess of 500K and where the average rent is £2400 per month, 100K a year, which is 5.5K a month after tax, doesn’t make you rich by any stretch of the imagination. You spend 70+% of your income on rent and childcare. Let us not get carried away with silly comparisons with millionaires.

In Germany your tax expenditure changes depending on you tax class. A married couple with children may end up paying much less taxes than in the UK (I for instance would pay ~£500-800 less a month).

That's great information. Thank you. Why no link to a calculator that does all of this like I've asked for a few times now if the government's own doesn't do it correctly?

Like I mentioned, marginal tax rate comparisons are often flawed and not helpful. If you are correct about your marginal tax rate changing to 60%, it still only means 25k have 60% taken. It still sucks of course but your "tax bill" isn't going to be 60%.

Let's take your "disastrous" example of making one extra pound on top of 99,999 GBP.

    Your Personal Allowance goes down by £1 for every £2 that your adjusted net income is above £100,000.

So if I make 100k exactly nothing changes at all. But let's call that an "off by one error". Let's say I earn 100,002. If I calculate this correctly - and I might not - then my allowance of 12,570 goes down to 12,569. So 1£ is now no longer tax free and I need to pay taxes on it. My additional 2£ of earnings are also subject to 40% tax. So I only get 1.2£ net from those.

So let's assume this does things correctly (unlike the government's own) https://www.uktaxcalculators.co.uk/ and input the numbers.

Ah yes, it seems to do it:

    Gross Income: £100,000
    Allowance: £12,570.00
    Net income: £66,322.92
    Average tax rate: ~33.6770%

    Gross Income: £100,002
    Allowance: £12,569.00
    Net income: £66,323.67
    Average tax rate: ~33.6776%

Difference in net income for 2£ extra gross: 0.75£ or slightly above 60% effective marginal tax so to speak. Looking at the average tax rate, there's hardly any difference at all.

Let's look at the other end:

    Gross Income: £125,000
    Allowance: £70.00
    Net income: £75,640.66
    Average tax rate: ~39.487%

I'd like to compare this to CAD again. Most expensive province of Quebec again. It's about 208,000 CAD.

    Gross Income: 208,000
    Net income: 122,953
    Average tax rate: 40.89%
    Marginal tax rate: 49.96%

So about 123k or about 73.8k£.

Do keep in mind of course that all of this is without taking into account various family or work situations in either case. Especially in said expensive province of Quebec, child care services are available in various ways like you describe for the UK. E.g. the 9$ per day day-care spots where the price also goes up with your income level, so the same kind of calculation you made for the UK could be made there. The more you earn, the more of your own money you have to use. In a province like Alberta, where your average tax for the above 208k is only around 33% you don't have day-care spots like that and will pay a lot more money for said services. Things like pension payments reduce your income before being input into this calculation. I.e. you could earn 250k CAD but put 42k into an RRSP and you'd end up back at the exact same calculation as above with 208k of taxable income.

Within the context of these tax changes, to whit: "we want to incentivise work, especially doctors", the marginal tax rate is the important one. The is important specifically because we have the case now where doctors are turning down work because their marginal rate for that extra work is 60%, and I don't blame them. Personally I have taken months off this year for that reason, although I am not a doctor. Marginal rates affect decisions at the margin, they matter.

That is fair enough (and what the article is referring to as well). Personally I'd rather make 150k and have about 90k in my pockets than to make 100k and have 66k in my pocket. Especially if a shitty 2 bedroom apartment costs 500k to buy.

It isn’t incorrect, he likely forgot to provide the correct tax code, so the calculator used the whole income tax allowance.

Please get your facts in order. You'll be taxed 60% of your income like others have said if you earn inside a certain bracket.

To add insult to injury the government also collects taxes on purchases. VAT.

Starting at 100k you lose your personal allowance which places you in an effective 60% tax rate.

Most people start avoiding having a take home pay of over 100k for this reason unless they’re in one of the few jobs where they earn far and above over 120~k.

The other replies have noted the personal allowance disappearing. There's also a student loan system designed to tax graduates in perpetuity (10% ish) though those who make it to 100 will probably clear it eventually.

And there's a 'national insurance' tax which is 13% paid by employer before even getting to your gross pay, primarily so that the tax levels look less horrendous. That's extra to the identically named 'national insurance' tax paid by employees, though that at least drops to 2% past some threshold.

100 is also the cut-off point for a weird scheme described at https://www.gov.uk/30-hours-free-childcare which seems to be £2k per child for a couple of years.

So if you're a graduate looking at making it past 100 with a kid in that bracket, marginal rate of 71% (40 income, 2 national insurance, 9 student loan, 20 personal allowance disappearing), to catch that 2k loss you have to get up to about £107k. There might be other similar schemes that I haven't heard of.

And that's before we start looking at other taxes, of which stamp duty is easily the one that annoys me the most but fuel duty probably the most expensive day to day. Pretty sure I've forgotten some too. The almost mandatory pension contribution that I expect to disappear in smoke at some point is a similar thing.

Sadly the up front number of 20% income tax is the one people hold onto while saying the UK is a low tax country. Even when their paycheck says something different.

If you earn a £100k, you’ll pay £33k in tax. Not £60k.

All the problems the uk gov are not because of absolutely terrible decisions by the conservatives, i think we should keep that in mind

I mean, any party could have been running the place for the past 13 years, there's no way to tell.

I don't know what it's like in other countries, but in the UK it pretty much feels like property has gotten so out of whack with the rest of the economy that working only really makes sense if you don't own your home.

A house that was 150K in 1999 is now almost 1.5 million.

Realistically wages might have doubled or tripled in that period.

There is just no purpose to it. Let's say you're 50, your house is paid off, and you have some minimal pension. You could work for a year, earn 100K (top percentile), earn maybe 60 after tax and... there kind of isn't really an and. You can't sell the house and buy another one without paying 50-100K in stamp duty on the transaction.

That's an entire year of working just to sell your house and buy the identical one next door.

The entire economy seems to rely on people who are forced into working because they're poor. There's very little carrot for people who are secure.