Author Topic: Taxation making earning more pointless  (Read 2039 times)

frugledoc

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Taxation making earning more pointless
« on: January 04, 2015, 01:14:37 PM »
I suppose this is a nice problem to have but in the UK there is an effective tax rate of 62% (including national insurance) on earnings between 100 - 120k.

My earnings are flitting around this level and I can keep below it by making pension contributions from my post tax salary but now approaching the end of tax year (April in the UK) I really don't want to earn much more money as it is likely to fall into the 62% tax level.

Also, my employer has reduced the amount paid for additional work, at a time when they need us to do it more than ever.

I used to get paid 500 pounds for an extra amount of work which would be taxed at 42% now it is 200 pounds which will be taxed at 42% or 62% if I go above the 100k.

Would people be willing to do extra work at this taxation level?

I don't need the money and as my spouse is a non earner I can invest money in her name and the income is essentially tax free so it is far easier to earn money under her name by investing in a rental property or income stocks than for me to earn it by working.
« Last Edit: January 04, 2015, 01:18:42 PM by frugledoc »

JLee

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Re: Taxation making earning more pointless
« Reply #1 on: January 04, 2015, 01:20:24 PM »
Wow, the tax bracket jumps by 20%?  Effectively you're going from 500 pounds at 42% to 200 pounds at 62%, so 290 pounds to 76 pounds?

I'd have a hard time wanting to do that, I think.

frugledoc

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Re: Taxation making earning more pointless
« Reply #2 on: January 04, 2015, 01:22:21 PM »
Yes, in the uk the first 10,000 pounds earned is tax free.  Once you earn more than 100k every 2 pounds earned you lose 1 pound of your tax free allowance on of your higher rate tax of 42%.  This equates to a tax rate of 62% (including mandatory national insurance payments which covers NHS and state pension).

I would rather do the work for a non monetary benefit such as extra annual leave and am thinking about negotiating for this.


Abe

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Re: Taxation making earning more pointless
« Reply #3 on: January 04, 2015, 01:36:26 PM »
I support the non-wage benefits approach. My parents earnings are such that 50% of any raise is immediately lost to various taxes. 50% of vacation days, however, are not! They have no use for the extra money anyway and would rather volunteer on their time off.

chasesfish

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Re: Taxation making earning more pointless
« Reply #4 on: January 05, 2015, 04:53:05 AM »
It depends on your goal, but its hard to justify doing the additional work.  We have this issue to with dual income earners in the US in states with an income tax.   We analyzed my wife's income at one point and her take-home was in the mid 50% of what she made

ShoulderThingThatGoesUp

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Re: Taxation making earning more pointless
« Reply #5 on: January 05, 2015, 05:30:04 AM »
That is frustrating. Your employer would likely understand your need to be paid more highly or otherwise compensated for the additional work. Or, if it's optional and you have plenty of money, then don't worry about it.