• @JoBo@feddit.uk
    link
    fedilink
    English
    61 year ago

    It’s worse than that..

    For lower rate tax payers, it starts at half the income tax rate (with no national insurance). So 10% instead of 32%. For residential property, 18% (with no NI) so 18% instead of 32%.

    For higher rate income tax payers it’s half the income tax rate (with no national insurance). So 20% instead of 52% (if NI wasn’t also tilted in favour of high earners). For residential property, 28% (with no NI) so 28% instead of 52%.

    But higher rate tax payers get a massive cut in NI too at not much above the higher rate income tax threshold, paying only 2% NI on earnings above the higher NI threshold, so on that portion of their earnings it is 20% (or 28%) instead of 42%.

    Then the very rich get to play with massive loopholes, only paying tax if they feel like it. Which, mostly, they don’t.

    • TWeaK
      link
      fedilink
      English
      41 year ago

      Yeah I left out NI for brevity lol. TL;DR for everyone else, in the last couple years they changed the boundaries for NI to match those for income tax. NI is 0% for the first £12,500, 12% up to £50k, 2% over £50k. So really you can just combine it with income tax, and the total tax bands are 0%, 32% and 42%. This means the take home tax rate difference is only 10%, not 20% like commonly perceived with the 20% and 40% rates.

      There’s also some fuckery around the £120k mark, where basically you take home less as your salary goes up a bit. I forget the exact details, but you have to punch through to almost £150k for it to be worthwhile, or something.

      Then there’s salary sacrifice, which anyone earning over £50k should consider. Basically, you agree with your employer to reduce your salary, and the extra goes straight into your pension. When you do this with income above £50k, you avoid paying the 40% tax at that time. If when you retire your retirement income remains below the 40% tax bracket, then you’ll never pay the 40%, only 20% when you withdraw your pension.