David Cameron Hints At Giveaway For Higher-Rate Taxpayers

[interestrateripoff]

http://www.theguardian.com/money/2014/jul/30/david-cameron-hints-giveaway-higher-rate-taxpayers

David Cameron has given his strongest hint yet that he may be preparing a giveaway for middle-income earners when he said he would "love" to raise the level at which people started paying 40% tax.

Speaking to workers at a water company on Wednesday, the prime minister said many people "who don't see themselves as fundamentally wealthy" were paying the rate, which applies when people earn more than £41,865 a year. Stressing that he could not make any promises, Cameron said he understood the problemwith the rate applying when people "are not earning a lot of money".

More than 2 million extra people will start paying the higher rate of tax over the course of the parliament, according to the Institute of Fiscal Studies – a phenomenon known as fiscal drag. That is because the rate does not rise, but salaries rise with wage inflation.

According to some estimates, the number of people in the higher-rate tax band has gone up to one in six of the population from the one in 20 who were affected when it was introduced by the former chancellor Nigel Lawson.

At the event, in Warrington, Cheshire, Cameron said: "I know that a lot of people believe that the 40p rate now kicks in quite early and quite a lot of people who don't see themselves as fundamentally very wealthy are paying that 40p tax rate. Now I would love to be able to stand here and say we are going to sort all this out, we will raise the thresholds of all these tax rates. I can't make that promise today."

Cameron said his priority was to lower taxes for the lowest earners, but added: "I understand the problem with the 40p rate kicking in when people are not earning a lot of money, and I have to look very carefully at the books before I can make any promises about it."

Cameron and George Osborne, the chancellor, have come under strong pressure from senior Conservatives to raise the threshold.The proposals were raised directly with the chancellor, George Osborne, at the backbench 1922 Committee in March, urging him to increase the trigger to £44,000 to stop workers such as teachers and police officers being hit. But in the budget, Osborne announced that the income threshold at which the 40p rate applies will increase by just 1% for each of the next two years, less than the rate of inflation.

Earning £40k a year is now not a lot of money!!!

They would possible be better just eradicating the 20p tax band altogether and have the tax rate starting at 40p at the £40k level.

[Mikhail Liebenstein]

They'd do better to sort out the current mess with people on over £60k and people over £100k paying 60% tax on a proportion of their income due the withdraw of child benefit and the personal allowance.

I know it doesn't get much sympathy from the unwashed masses, but I do see these hurdles that have been put into what is otherwise a progressive tax system as unfair. I think they are there to stop the little people rising.

[The Knimbies who say No]

£40k per annum job, take home £30k, pay £10k rent, £3k food, £3k car costs, £3k utilities/council tax.

Leaves £11k for living and saving up that all important deposit.

[zugzwang]

It's tough at the top.

[R K]

He's a moron.

Taxes need to rise and significantly. Something around equiv 8p on basic rate. He's running out of promises.

Edited July 30, 2014 by R K

[TheCountOfNowhere]

Using peoples own money to try and buy their votes.

They can go **** themselves im voting UKIP

[Wurzel Of Highbridge]

£40k per annum job, take home £30k, pay £10k rent, £3k food, £3k car costs, £3k utilities/council tax.

Leaves £11k for living and saving up that all important deposit.

You forgot to deduct the £200pcm student loan repayments from your calculation, there's £2400 gone in another form of tax.

[spyguy]

Hand job from Krusty?

[RentaBear]

http://www.theguardian.com/money/2014/jul/30/david-cameron-hints-giveaway-higher-rate-taxpayers

Earning £40k a year is now not a lot of money!!!

They would possible be better just eradicating the 20p tax band altogether and have the tax rate starting at 40p at the £40k level.

If the average UK salary is ~26K, I don't see how 40K is a fortune - it's only 1/10th of the cost of the 'average' London house for example.

One of the things that depresses me the most about the UK is that you can bring millions of people out of tax by raising the threshold at the bottom end to a mere £10K per year - we live in a bloody expensive, but poorly paid country in general IMHO.

Check out the official figures for 2011-2012 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/276204/table3-1a.pdf - they make very depressing reading IMHO, but they also make it very obvious why there aren't going to be armies of people queuing up to buy overpriced houses if the banks won't lend at crazy salary multiples post MMR.

[wonderpup]

If Milliband can't capitalize on Cameron's claim that 40k a year is not a lot of money then we might as well have gromet as leader of the opposition instead- to most of the working population 40k a year is a lot of money.

40k puts you in roughly the top ten percent- most people are on 25k or less.

[Frugal Git]

They should raise the personal allowance to 15k first if they were serious about tackling unfairness. The basic cost of living for a single person is around 1200 p/m I reckon, so let people earn that before they pay tax.

the 40% threshold should be at 60k as someone else alluded to - that is true 'higher earner' level these days rather than the old benchmark, and the child benefit and personal allowance tapering removed altogether to get rid of the ridiculous distortion.

I say this as someone who takes home minimum wage before anyone thinks I dont live in the real world.

[londislagerhound]

Reducing tax just means people will have more to spend on mortgages, and we know where that leads.

[thecrashingisles]

If Milliband can't capitalize on Cameron's claim that 40k a year is not a lot of money then we might as well have gromet as leader of the opposition instead- to most of the working population 40k a year is a lot of money.

40k puts you in roughly the top ten percent- most people are on 25k or less.

Being in the top ten percent of earners is very different from being in the top ten percent most wealthy.

[Habeas Domus]

Check out the official figures for 2011-2012 https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/276204/table3-1a.pdf - they make very depressing reading IMHO, but they also make it very obvious why there aren't going to be armies of people queuing up to buy overpriced houses if the banks won't lend at crazy salary multiples post MMR.

I think those figures include part time work, so some people might have 2 part time jobs paying 20K each.

Probably not a big percentage, but enough to skew the figures.

Also people who do a single part time job tend to be paid less than an equivalent full timer doing the same work (and why yes they tend to be female too)

[RentaBear]

If Milliband can't capitalize on Cameron's claim that 40k a year is not a lot of money then we might as well have gromet as leader of the opposition instead- to most of the working population 40k a year is a lot of money.

40k puts you in roughly the top ten percent- most people are on 25k or less.

And IMHO, it is rather sad that 90% of the people in the UK who bother to get off their arses and go to work are on less than £20/hr before tax. 90%...

But suggest taxing dead people, or stopping people gifting their lazy offspring 20x the average wage when they die, and the 90% are up in arms...

What could we raise the personal allowance to if we put 40% CGT on all property sales and removed the tax brakes from BTL?

Edited July 30, 2014 by RentaBear

[Habeas Domus]

Being in the top ten percent of earners is very different from being in the top ten percent most wealthy.

and also different to the top 10% of tax payers

[MarkG]

40k puts you in roughly the top ten percent- most people are on 25k or less.

And it's still not a lot of money.

Someone on 20k who bought a house in the 90s will be much better off than someone earning 40k and renting.

[The Knimbies who say No]

£40k is 84th percentile, so just outside top 15%. Top 10% starts at closer to £50k.

[RentaBear]

£40k is 84th percentile, so just outside top 15%. Top 10% starts at closer to £50k.

I think we're all falling for it, just at the politicos and rentiers want - have the bottom 99% fight over the last 10-15 percentiles, and how much we should punish those a few percentiles above us, and we'll all ignore just how much richer than all of us the 1% ers are...

[stormymonday_2011]

Clearly Cameron takes us all for idiots.

His Chancellor was lowering the threshold at which the 40% band kicked in more or less at the same time as he was cutting 5p off the top rate of tax for the weatlhiest section of society

http://www.hmrc.gov.uk/rates/it.htm#2b

In 2014/15 it starts at over a £3000 lower level than in 2011/12.

As a consequence 4.6 million now pay tax at the 40% rate far more than when Gordon Brown was Chancellor. And this change has happened at a time when wage growth has been minimal.

Now there is an election looming he suddenly decides to consider reversing the process.

Sorry Dave but why would I want to vote for a complete c**t like you.

Edited July 31, 2014 by stormymonday_2011

[StainlessSteelCat]

The fiscal drag thing is the kicker, whatever the tax rate cut off. It should at least track some kind of inflation index.

I've been lucky enough to earn enough money to fall the higher tax traps in the past. I can hardly complain about it - although the £100K one definitely made think about wanting to maintain that level of income. I've since decided my free time is more valuable than chasing more cash.

But it's at the average person end of the spectrum (and lower) where the real action should be taking place rather than offering sops to the better off.

[RentaBear]

The fiscal drag thing is the kicker, whatever the tax rate cut off. It should at least track some kind of inflation index.

I've been lucky enough to earn enough money to fall the higher tax traps in the past. I can hardly complain about it - although the £100K one definitely made think about wanting to maintain that level of income. I've since decided my free time is more valuable than chasing more cash.

But it's at the average person end of the spectrum (and lower) where the real action should be taking place rather than offering sops to the better off.

The better off can of course gamble that the fiscal drag will hurt their pensions less than their current income, and salary sacrifice all the way back down to 41K if they don't have too many cribs and Mercs on HP...

[billybong]

It's a bit like the promise he made before the last general election to abolish income tax on savings for basic-rate taxpayers - to encourage a culture of savings.

Promises promises.

.

Edited July 31, 2014 by billybong

[hairymactwoshoes]

I guess the UK has cleared it's deficit then Mr Cameron?

If it barely goes down with 3% growth how will they pay for this?

[StainlessSteelCat]

The better off can of course gamble that the fiscal drag will hurt their pensions less than their current income, and salary sacrifice all the way back down to 41K if they don't have too many cribs and Mercs on HP...

Quite, and that's exactly what I do.