What should be done about the UK taxation system?

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Big business and personal tax avoidance is clearly on the increase.

What needs to happen?
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  • quarkyquarky Frets: 1919
    I wrote in another thread, but abolish corporation tax, and tax all income. Problem solved. Or closer to being solved anyway.
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  • It does gall when I see 40% of my salary accumulate to a sizable deduction each year and yet rich celebs dodge tax on their private jets or have a chain of companies set up to pay themselves as loans from offshore.

    But I was a self made multi millionaire and could afford lawyers and tax consultants, would I look for these loopholes as well to avoid paying £3M tax on my new luxury purchase?

    Probably.

    “Toto, I've a feeling we're not in Kansas anymore”
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  • capo4th said:
    personal tax avoidance is clearly on the increase.
    I am not convinced that avoidance is any more common than before. It is just getting discovered more often.

    Whatever rules are created, somebody will devise a way to circumvent them and/or turn them to advantage. The persons most likely to understand how to cheat the system are those in daily contact with it. 

    There is also the matter of how rigorously the cheats are pursued by law enforcers. There does seem to be far more attention directed towards welfare fiddlers than, say, dodgy business owners.
    I fear the Geeks, even when they bear GIFs.
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  • jpfampsjpfamps Frets: 1160

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
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  • jpfamps said:

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
    What makes you say ours is the most complex? My experience with Canada was an eye-opener as it made the British system look like a cakewalk. 

    A few year ago, the Telegraph ran an article saying how complex the British property tax system was and how it might endanger London's reputation as an investment haven. Given the revelations in recent years from the like of Private Eye about shell companies buying up London property, I'd conclude that the Telegraph's statement was mostly bullshit. 

    As for complexity increasing the opportunity for avoidance... the Cayman Islands regularly pops up in studies as one of the simplest taxation systems in the entire world whilst being oft mentioned in tax avoidance articles.  
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  • jpfampsjpfamps Frets: 1160
    jpfamps said:

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
    What makes you say ours is the most complex? My experience with Canada was an eye-opener as it made the British system look like a cakewalk. 

    A few year ago, the Telegraph ran an article saying how complex the British property tax system was and how it might endanger London's reputation as an investment haven. Given the revelations in recent years from the like of Private Eye about shell companies buying up London property, I'd conclude that the Telegraph's statement was mostly bullshit. 

    As for complexity increasing the opportunity for avoidance... the Cayman Islands regularly pops up in studies as one of the simplest taxation systems in the entire world whilst being oft mentioned in tax avoidance articles.  

    What makes me say it's the most complex is the fact it's over 17,000 pages long; far greater than any other country in the world.

    It's the complexity here that actually allows people to exploit loop holes.

    The Cayman Islands does indeed have a much simpler tax system; however people exploiting off shore tax havens such as the Caymans are not avoiding tax in the Cayman Islands.


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  • jpfamps said:
    jpfamps said:

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
    What makes you say ours is the most complex? My experience with Canada was an eye-opener as it made the British system look like a cakewalk. 

    A few year ago, the Telegraph ran an article saying how complex the British property tax system was and how it might endanger London's reputation as an investment haven. Given the revelations in recent years from the like of Private Eye about shell companies buying up London property, I'd conclude that the Telegraph's statement was mostly bullshit. 

    As for complexity increasing the opportunity for avoidance... the Cayman Islands regularly pops up in studies as one of the simplest taxation systems in the entire world whilst being oft mentioned in tax avoidance articles.  

    What makes me say it's the most complex is the fact it's over 17,000 pages long; far greater than any other country in the world.

    It's the complexity here that actually allows people to exploit loop holes.

    The Cayman Islands does indeed have a much simpler tax system; however people exploiting off shore tax havens such as the Caymans are not avoiding tax in the Cayman Islands.


    The length of the tax code doesn't necessarily make it more complex. The PWC/World Bank reports on global taxation used to focus on length of tax code. In recent years, other elements such as rankings for ease of doing business with regard to the taxpayer came into it. And so and and so on... it gets into that "this study says yes, this study says no" element. o I will defer to you. 

    With regard to the Caymans: no, they are not avoiding tax in the Caymans. No disagreement. But I don't believe that complexity = automatically means greater loop holes. 
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  • jpfampsjpfamps Frets: 1160
    jpfamps said:
    jpfamps said:

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
    What makes you say ours is the most complex? My experience with Canada was an eye-opener as it made the British system look like a cakewalk. 

    A few year ago, the Telegraph ran an article saying how complex the British property tax system was and how it might endanger London's reputation as an investment haven. Given the revelations in recent years from the like of Private Eye about shell companies buying up London property, I'd conclude that the Telegraph's statement was mostly bullshit. 

    As for complexity increasing the opportunity for avoidance... the Cayman Islands regularly pops up in studies as one of the simplest taxation systems in the entire world whilst being oft mentioned in tax avoidance articles.  

    What makes me say it's the most complex is the fact it's over 17,000 pages long; far greater than any other country in the world.

    It's the complexity here that actually allows people to exploit loop holes.

    The Cayman Islands does indeed have a much simpler tax system; however people exploiting off shore tax havens such as the Caymans are not avoiding tax in the Cayman Islands.


    The length of the tax code doesn't necessarily make it more complex. The PWC/World Bank reports on global taxation used to focus on length of tax code. In recent years, other elements such as rankings for ease of doing business with regard to the taxpayer came into it. And so and and so on... it gets into that "this study says yes, this study says no" element. o I will defer to you. 

    With regard to the Caymans: no, they are not avoiding tax in the Caymans. No disagreement. But I don't believe that complexity = automatically means greater loop holes. 

    Presumably that's based on the logic that that conclusion was in the Telegraph and the Telegraph must wrong because it supports the Tories.......

    You can find similar conclusions elsewhere, eg in the Grauniad (I read Private Eye too by the way).

    https://www.theguardian.com/commentisfree/2015/feb/13/britain-tax-code-17000-pages-long-dog-whistle-very-rich

    It's axiomatic that a more complex tax code will give more opportunity for reducing tax liabilities; there are numerous examples of this, eg the K2 scheme.

    I think a number of people confuse simplify the tax code, with reducing taxation.

    It is nothing of the sort.

    My main objection to the complexity of the tax code, is that it encourages economic activity that has no other purpose but to reduce tax liability rather than doing something productive.


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  • capo4th said:
    Big business and personal tax avoidance is clearly on the increase.

    What needs to happen?
    why is it on the increase?

    I thought it was just easier for hackers to expose it
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  • Taxes are too complicated, and Tax credits are a bit silly really, 
    you have people getting more "tax credits" than their actual income
    Just call it what it is:benefits/subsidy/whatever

    And if people should be subsidised to have kids (which I think they should), just give it to everyone with kids
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  • jpfamps said:
    snip


    The length of the tax code doesn't necessarily make it more complex. The PWC/World Bank reports on global taxation used to focus on length of tax code. In recent years, other elements such as rankings for ease of doing business with regard to the taxpayer came into it. And so and and so on... it gets into that "this study says yes, this study says no" element. o I will defer to you. 

    With regard to the Caymans: no, they are not avoiding tax in the Caymans. No disagreement. But I don't believe that complexity = automatically means greater loop holes. 
    While I agree in principle (since it is obviously possible to write 20,000 of watertight regs and 2 pages with holes throughout), you have to remember that our legislation is written by civil servants, who are often the people who applied for but didn't get the jobs finding and using the loopholes...
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  • capo4thcapo4th Frets: 3178
    Taxes are too complicated, and Tax credits are a bit silly really, 
    you have people getting more "tax credits" than their actual income
    Just call it what it is:benefits/subsidy/whatever

    And if people should be subsidised to have kids (which I think they should), just give it to everyone with kids
    Why on earth should people be subsidised to have kids? 

    Don't we have enough people sponging from the state and you want to create more? 
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  • capo4th said:
    Taxes are too complicated, and Tax credits are a bit silly really, 
    you have people getting more "tax credits" than their actual income
    Just call it what it is:benefits/subsidy/whatever

    And if people should be subsidised to have kids (which I think they should), just give it to everyone with kids
    Why on earth should people be subsidised to have kids? 

    Don't we have enough people sponging from the state and you want to create more? 
    have a look at Italy and Germany - they have a crisis of underpopulation
    who do you think will be paying for your services and state pension when you retire?
    who do you think will be working in the hospitals, shops, offices and care homes?

    "sponging" is silly loaded language, please try harder.

    we need people to have more kids, and only giving a subsidy to the poorest people to have them is really stupid: it's as if we don't want our professional and middle classes to have kids
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  • capo4thcapo4th Frets: 3178
    capo4th said:
    Taxes are too complicated, and Tax credits are a bit silly really, 
    you have people getting more "tax credits" than their actual income
    Just call it what it is:benefits/subsidy/whatever

    And if people should be subsidised to have kids (which I think they should), just give it to everyone with kids
    Why on earth should people be subsidised to have kids? 

    Don't we have enough people sponging from the state and you want to create more? 
    have a look at Italy and Germany - they have a crisis of underpopulation
    who do you think will be paying for your services and state pension when you retire?
    who do you think will be working in the hospitals, shops, offices and care homes?

    "sponging" is silly loaded language, please try harder.

    we need people to have more kids, and only giving a subsidy to the poorest people to have them is really stupid: it's as if we don't want our professional and middle classes to have kids
    Agreed poor people having loads more kids is a very bad idea. 

    We need the right type of children. Educated well behaved with good manners.
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  • jpfamps said:
    jpfamps said:
    jpfamps said:

    Tax code is way too complicated; we have the most complex tax system in the world.

    Complexity increases opportunity for avoidance, an encourages individuals to pursue economic activity that reduces tax liability rather than is economically productive.

    Biasing the tax system away from the productive part of the economy and towards the unproductive would be a step in the right direction too.
    What makes you say ours is the most complex? My experience with Canada was an eye-opener as it made the British system look like a cakewalk. 

    A few year ago, the Telegraph ran an article saying how complex the British property tax system was and how it might endanger London's reputation as an investment haven. Given the revelations in recent years from the like of Private Eye about shell companies buying up London property, I'd conclude that the Telegraph's statement was mostly bullshit. 

    As for complexity increasing the opportunity for avoidance... the Cayman Islands regularly pops up in studies as one of the simplest taxation systems in the entire world whilst being oft mentioned in tax avoidance articles.  

    What makes me say it's the most complex is the fact it's over 17,000 pages long; far greater than any other country in the world.

    It's the complexity here that actually allows people to exploit loop holes.

    The Cayman Islands does indeed have a much simpler tax system; however people exploiting off shore tax havens such as the Caymans are not avoiding tax in the Cayman Islands.


    The length of the tax code doesn't necessarily make it more complex. The PWC/World Bank reports on global taxation used to focus on length of tax code. In recent years, other elements such as rankings for ease of doing business with regard to the taxpayer came into it. And so and and so on... it gets into that "this study says yes, this study says no" element. o I will defer to you. 

    With regard to the Caymans: no, they are not avoiding tax in the Caymans. No disagreement. But I don't believe that complexity = automatically means greater loop holes. 

    Presumably that's based on the logic that that conclusion was in the Telegraph and the Telegraph must wrong because it supports the Tories.......

    You can find similar conclusions elsewhere, eg in the Grauniad (I read Private Eye too by the way).

    https://www.theguardian.com/commentisfree/2015/feb/13/britain-tax-code-17000-pages-long-dog-whistle-very-rich

    It's axiomatic that a more complex tax code will give more opportunity for reducing tax liabilities; there are numerous examples of this, eg the K2 scheme.

    I think a number of people confuse simplify the tax code, with reducing taxation.

    It is nothing of the sort.

    My main objection to the complexity of the tax code, is that it encourages economic activity that has no other purpose but to reduce tax liability rather than doing something productive.



    I'm at a complete loss as to the sentence in bold as to why you'd actually put that. If I was that much of a spanner that I would dismiss something because it's in a 'Tory newspaper', then I wouldn't have a partner who works for such a newspaper. Please don't put me down as someone who disagrees with something on party lines. I've voted for more Conservative politicians than Labour ones in my lifetime. 

    I agree, a more complex tax code would give more opportunities for theft. But length of tax code and complexity of tax code are different things. I'll speak purely from my experiences of the tax code here and in Canada, both as a private individual and as a business individual. Canada was far more complex. 



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  • The country is run by the rich for the benefit of the rich. Ergo the rich should pay for it.
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  • Ro_SRo_S Frets: 911
    Married couples with children should be allowed to combine their income tax personal allowances - regardless of how many hours of employment they do or don't do.
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  • Ro_SRo_S Frets: 911
    edited November 2017
    capo4th said:
    Big business and personal tax avoidance is clearly on the increase.

    What needs to happen?
    Not long ago the Govt gave a new personal tax allowance of about £1,000 on interest on savings to everyone.  So what?    Interest rates have been awful for ages.   
    Over the past, what, seven years, the Govt has increased the personal tax allowance on earned income quite a lot.  So what?   
    I think both measures, which increase tax avoidance, are fine.
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  • capo4thcapo4th Frets: 3178
    For every £2 you earn over £100000 a year you lose £1 personal allowance. 

    This means you pay an income tax rate on this money of 62%.

    Its just not cricket !
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  • Ro_SRo_S Frets: 911
    edited November 2017
    capo4th said:
    For every £2 you earn over £100000 a year you lose £1 personal allowance. 

    This means you pay an income tax rate on this money of 62%.

    Its just not cricket !
    I don't really get your point. perhaps you could elaborate, especially on the first bit.   

    The annual personal allowance (about £10K now?) means someone earning over £100k p.a. will be paying full tax on everything they earn over c. £10k, yes/no?   That's a lot of money to pay tax on still.   

    The increase in the personal allowance came along with also changes to income tax (e.g. tiers, rates).  And just before the coalition govt, Gordon Brown scrapped the 10% band.

    Any tax rate over 50% is high.  Who wants to pay over half of everything you earn extra over X amount to the taxman?   'Makes one feel it's hardly worth working for it.
    .
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  • Ro_S said:
    Any tax rate over 50% is high.  Who wants to pay over half of everything you earn extra over X amount to the taxman?   'Makes one feel it's hardly worth working for it.
    .
    When George Harrison wrote Taxman, wasn't it 19/6 out of every pound? IMO, that's the rate that makes it not worth working for (unless the profits are squirrelled away overseas)
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  • Ro_SRo_S Frets: 911
    edited November 2017
    stickyfiddle said:

    you have to remember that our legislation is written by civil servants, who are often the people who applied for but didn't get the jobs finding and using the loopholes...
    Part of the problem is that the State hire in consultants to help write the tax rules, and then the same people are hired as consultants by companies etc to advise them how to best avoid tax.   It's an absurd situation.   Cyclical gamekeeper-turned-poacher, 
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  • Ro_SRo_S Frets: 911
    Ro_S said:
    Any tax rate over 50% is high.  Who wants to pay over half of everything you earn extra over X amount to the taxman?   'Makes one feel it's hardly worth working for it.
    .
    When George Harrison wrote Taxman, wasn't it 19/6 out of every pound? IMO, that's the rate that makes it not worth working for (unless the profits are squirrelled away overseas)
    I'm not old enough to do shillings etc, but I think the top tax rate at some point in the 1960s was 98% or something.   It's what prompted the Stones, for example, to go non-dom.
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  • Ro_SRo_S Frets: 911
    edited November 2017
    CFD trading, unlike share dealing, is not subject to Capital Gains Tax, so you can avoid tax on CFD trading gains completely .  How does that make sense?   

    Premium Bond winnings are not taxable either, though - even if one won £1million 

    All those people who hold Premium Bonds are tax avoiders. Terrible people.
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  • exocetexocet Frets: 431
    Ro_S said:
    capo4th said:
    For every £2 you earn over £100000 a year you lose £1 personal allowance. 

    This means you pay an income tax rate on this money of 62%.

    Its just not cricket !
    I don't really get your point. perhaps you could elaborate, especially on the first bit.   

    The annual personal allowance (about £10K now?) means someone earning over £100k p.a. will be paying full tax on everything they earn over c. £10k, yes/no?   That's a lot of money to pay tax on still.   

    The increase in the personal allowance came along with also changes to income tax (e.g. tiers, rates).  And just before the coalition govt, Gordon Brown scrapped the 10% band.

    Any tax rate over 50% is high.  Who wants to pay over half of everything you earn extra over X amount to the taxman?   'Makes one feel it's hardly worth working for it.
    .
    When you earn over £100k pa under PAYE system, you don't have a £10k fixed personal allowance, it is reduced as capo4th stated on the basis of "for every £2 over £100k you earn, you loose £1 of tax allowance".

    So at £120k, you have effectively lost your personal tax allowance.

    If you are earning at that level, its very likely that you will already be in receipt of additional "taxable benefits" which will already have reduced your £10k tax free allowance. 


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  • @Ro_S 19/6 out of a £ was 97.5%, you weren't far off. I'd go non-dom too, especially if I could afford somewhere nice.
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  • scrumhalfscrumhalf Frets: 4212
    Before you start going about restructuring the tax system you need to define what the tax system is supposed to do.

    A system designed to assist in the redistribution of wealth is very different from one which seeks to maximise the Treasury's income in the most efficient way possible. It's no accident that when Thatcher came to power tax rates were lowered but tax yields increased.

    We had a good, clear tax system in 1997, but Prudence Brown fucked it up unbelievably. The smaller the system, the fewer opportunities there are for loopholes.

    The tax regime of the Wilson/Callghan years was harsh. A 98% top tax rate for income (83% on earned income and a 15% investment income surcharge, with investment income being treated as the top slice) was iniquitous. It led to a brain drain, people choosing where possible to have their income taxed in another jurisdiction, and the introduction of wide-scale avoidance measures such as benefits in kind (and things like the second-hand suit game).
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  • Ro_SRo_S Frets: 911
    edited November 2017
    exocet said:

    When you earn over £100k pa under PAYE system, you don't have a £10k fixed personal allowance, it is reduced as capo4th stated on the basis of "for every £2 over £100k you earn, you loose £1 of tax allowance".

    So at £120k, you have effectively lost your personal tax allowance.

    If you are earning at that level, its very likely that you will already be in receipt of additional "taxable benefits" which will already have reduced your £10k tax free allowance. 

    A reduced personal allowance on incomes over £100k p.a., and it being eliminated on incomes over £123k p.a., is just an alternative method to implementing higher tax rates at certain tiers.  It's merely swings or roundabouts.   It's just about 'optics'.  An existing tax rate at these higher income levels of 40% is historically low.
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  • Ro_S said:
    exocet said:

    When you earn over £100k pa under PAYE system, you don't have a £10k fixed personal allowance, it is reduced as capo4th stated on the basis of "for every £2 over £100k you earn, you loose £1 of tax allowance".

    So at £120k, you have effectively lost your personal tax allowance.

    If you are earning at that level, its very likely that you will already be in receipt of additional "taxable benefits" which will already have reduced your £10k tax free allowance. 

    A reduced personal allowance on incomes over £100k p.a., and it being eliminated on incomes over £123k p.a., is just an alternative method to implementing higher tax rates at certain tiers.  It's merely swings or roundabouts.   It's just about 'optics'.  An existing tax rate at these higher income levels of 40% is historically low.
    what do you mean by "optics"?
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  • Ro_S said:
    exocet said:

    When you earn over £100k pa under PAYE system, you don't have a £10k fixed personal allowance, it is reduced as capo4th stated on the basis of "for every £2 over £100k you earn, you loose £1 of tax allowance".

    So at £120k, you have effectively lost your personal tax allowance.

    If you are earning at that level, its very likely that you will already be in receipt of additional "taxable benefits" which will already have reduced your £10k tax free allowance. 

    A reduced personal allowance on incomes over £100k p.a., and it being eliminated on incomes over £123k p.a., is just an alternative method to implementing higher tax rates at certain tiers.  It's merely swings or roundabouts.   It's just about 'optics'.  An existing tax rate at these higher income levels of 40% is historically low.
    the tax system's added complexities surely make it more and more likely for people with higher incomes to take professional advice on reducing their tax liabilities , e.g.

    1. gradually removing the £10k tax free allowance means a pay rise from £100k to £110k is taxed at 60%, therefore the advice would be to increase pension contributions
    2. you are not allowed to contribute as much into your pension when your salary goes above £150k, by £210k you can only save £10k per year, or else pay a lot of tax on those contributions, making it pointless to save
    3. If your "lifetime savings pension pot" goes over £1m, you get taxed at 55% on that, far more than the tax rebate was when saving the money http://www.telegraph.co.uk/finance/personalfinance/special-reports/11533409/Lifetime-allowance-How-to-avoid-55pc-tax-bills-on-your-pension.html
    4. removal of child benefit above £50k creates a marginal rate of 64.75% https://www.contractorcalculator.co.uk/images/20140818-MarginalTaxRates.jpg


    IMHO the tax system should be simple, predictable, and no punitive. That way, someone getting a £10k pay rise will think "ah, x amount of that will go in tax, same as what I get now, but I'll still get more in my pocket". As it stands, the correct perspective would be "I'd better check I'm not on one of the many thresholds beyond which punitive tax is charged, or special terms applied"
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