Comment by Dylan16807
9 days ago
That jump in childcare costs definitely sounds annoying but if the overall percentage isn't very high then you're not being taxed to the eyeballs.
We could imagine fixing the problem by making the childcare voucher phase out between 80k and 100k, and at 100.2k you'd get exactly the same amount as you get under the current system.
In this hypothetical would you still say taxed to the eyeballs? If so, what would your justification be?
The nuance of the situation was obviously missing from that short "emotional" statement I made, but I wasn't intending to start the argument it caused, just expressing some frustration in passing before someone jumped on my back.
With a progressive tax band, the burden is different, you're aware of it ahead of time and you set your living standards accordingly, you won't see a big sudden drop and can adjust accordingly. You can't suddenly sell your home or find a much higher paying job in the same space of time a small pay increase took you over the cliff.
For my generation, a professional that's having a family has probably focused on their career to get there, having there kids once they break some income threshold at a certain age, let's say it's 80k to fit with your numbers. You bought your home somewhere where those higher salaries are, paid a premium, higher SDLT on a small new build flat, you upsize when you have kids, buy a(n) (old) house, now overpriced due to property price jumps in the last few years, another chunk of SDLT, bills much higher, then you hit 100k as your costs have gone up significantly, that might be manageable, but you've just lost 2k per child to the tax credit trap, then the next 10k breaks even, after that you're taxed at 60% while your salary can't/won't be able to increase enough to offset that additional tax burden and your living standards have materially dropped because you got a pay rise.
I suppose the nuance I'm trying to convey is one of timing compounded by cliffs in the tax system that wouldn't become the sudden problem they are if the tax system wasn't set up the way it is.
One could argue that you could have known this, but I don't believe anyone would be seriously aware of the pitfalls until they have kids or hit a salary where you're going to be hit with a big step in tax burden.
Sure it won't affect everyone the same, but if you happen to meet those specific criteria with that specific timing, it can certainly feel like being "taxed to the eyeballs" even if that isn't the best way to put it. I'm far from the only person in that position, it's just the natural progression for some.
I hope that explains my position a bit better. I wasn't trying to say "I pay too much tax as a percentage of my income", in fact I DON'T think that, but I and others I've spoken to in this situation believe it's a tax-based ceiling on our progression and is a tax-based contribution to the growing wealth devide pushing anyone down that attempts to break into the middle class, which as a whole just makes the rich richer and the poor poorer; no I'm not putting myself in those brackets before someone jumps on me, but pushing the middle down makes the rich richer and the poor poorer (sorry slight tangent at the end there).
I think some perspective is missing if you’re describing this as “pushing anyone down that attempts to break into the middle class” when the cutoff points (when the step changes occur, as you’re correct to note) come into effect at around something like the 95th percentile of UK salaries.
https://thesalarysphere.com/blog/average-salary-uk/
I don't think there's a clear consensus on what is considered middle class in this country now, for many it can be social, and other factors, I would consider it, in this context to be a certain standard of living.
Owning a home, having significant savings, holidays abroad at least once a year, sending your children to private school, etc are probably some things I'd consider markers of being in the lower middle class.
On that basis, homes are becoming harder to own, savings are being eaten up by higher cost of living, the pound is weakening and taxes are making it untenable to send your children to private school.
Maybe my idea of what being middle class is is wrong, but it can't be far off, and that's exactly the group of people who aren't going to go much further beyond that to whatever comes at the next stage, I don't know what living standards look like for people above that; multiple properties, significant portfolios, not working for a living?
If my perspective if off, I'm willing to hear it.
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This may be slightly chicken and egg; it's the 95th percentile of salaries partly because no one wants to take a salary above that. Instead they use salary sacrifice, pensions, dividends, capital gains, leaving money in personal service company, etc. anything to avoid having a personal paper income above that threshold.
I suspect it's nowhere near the 95th percentile of earned wealth.
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