At 90k GBP you are paying 45%. I guess it depends on what “nowhere near half” means. 45% is close imo. Especially with VAT added in on purchases. Yes the average London wage is more like 50k GBP, but from that perspective it’s also only double the average wage before you hit 45%+ tax take.
The top UK tax rate (including employers NI etc) is ~59%.
1. https://listentotaxman.com/?year=2022&taxregion=uk&age=0&tim...
This is so misleading.
At £90K you get a £12,579 tax free allowance leaving £77,421 taxable. You will pay £7,540 from the 20% band, £15,888.40 from the 40% band and nothing from the 45% band for a total of £23,428.40. National Insurance will be £5,318.60 making the total deduction £28,747.
So approx 32%.
Edit: which yes takes it to 43% not the 45% I originally wrote.
Now enjoy paying another 20% VAT on any goods and services
Only the part of that that would actually be passed through to you as salary in the absence of the tax could reasonably be considered part of your tax burden. Hard to say how much that is without any information about your field or employer, but I guarantee it's less than 100%.
The average UK salary is <35k GBP. At that level total deductions are 20%, and your employer pays 10% employer NI.
> for more than small minorities of the population.
covers that situation. Simply put, only a small minority of people in the UK pay that much tax.
Not to mention the classic error you’ve made
> hit 45%+ tax take.
that tax take only applies to persons income that’s above 120k. The actual total tax burden across their income is substantially lower, given everything below £120k is taxed at a much lower rate.
Actually I didn’t error. This is the total tax paid expressed as a percentage. It is not the marginal tax rate. See the link I provided as evidence (add total deductions + employers NI together).
Why would anyone do this? Employers NI is a business tax, why would consider that a tax paid by individuals?
If you’re gonna start attributing employer taxes to individuals, then why not start including business rates and other random taxes, then you can gin up any level tax burden you want.
The fact that it was taxed above some line rather than below it doesn’t matter. (Of course that means it needs to be added to both the numerator and denominator when calculating the total tax burden, something that is often skipped.)
It further only tend to be included when complaining about high tax countries, and conveniently forgotten when people compare w/e.g. US taxation.
Nevertheless, even with them included, only a few European countries have total tax wedges above 50% for more than small portions of the population.
If you make money by your labor hours directly being billed and the buyer of those hours pays VAT on that labor, then I agree.
So long as there’s a direct and 100% link between your labor and the taxed amount, it’s value you created and was taxed away, without regard to who stroked the check to the tax authorities.
It's irrelevant to me, because it's not a tax on your contracted income.
You can make an argument that it is tax.on the value you created, sure, but not on your income because for most employees there is no direct link between value created and income.
I’m looking at it as a tax on direct labor. Which is also a consistent lens to use.
However, my initial claim that only a small portion of people in Europe approaches 50% holds for total tax wedge as well.
I’m talking about taxes that have a direct relationship to your income. If your income changes and the taxes paid change in proportion to your income change then that should be counted as taxed against your income.
Doesn’t matter if you call it labor, wage, salary.
Likewise if you have options/shares as part of remuneration it is often specified that the employee pays the employers NI for it.
Honestly it’s just a cheeky way for the govt to hide income taxes.
Why not include business rates? Because it’s not linked to the employees salary. It doesn’t change based on the employees salary.