4 ms·

It's actually better to think of the UK loans as a graduate tax - and in that way it's pretty progressive. You pay 9% extra from when you earn over 25k a year

It's actually better to think of the UK loans as a graduate tax - and in that way it's pretty progressive. You pay 9% extra from when you earn over 25k a year (IIRC). So those who need a degree to go into lower paying, yet skilled, professions (nursing, teaching) can do so easily safe in the knowledge that yes, there's this big sum of money that they "owe" but it'll only be taken once they are earning an OK salary, and they don't have to pay it all back if their earnings never rise.

jonatron 8y ago
If you make 50k, have a child, and have a student loan, your marginal tax rate becomes 62%, that's 40% (income) +2% (NI) +9% (Loan) + 11% (child benefit reduction). I don't think that's progressive, I think it's excessive taxation.
- ipsi 8y ago
  It goes up to 71% at £100,000+ (then drops again at £123,700), including NI and Student Loans - maybe even over 100%, depending on how much childcare you lose out on. For example, going from £100,000 to £100,001/year immediately costs you 570 hours/year of free childcare (potentially a couple of thousand pounds per year), and all of your tax-free childcare (potentially over a thousand pounds per year). Note that this does require _one_ person in a couple to be earning over £100,000, so it's hard to have a lot of sympathy in that case - that certainly doesn't count as struggling! On the other hand, it's also not at all progressive - it comes in all at once, potentially meaning you should refuse a pay rise. It's also _very_ different to the headline tax rate of 40% that you _think_ you're paying...
  - flatfilefan 8y ago
    Just ask for a 10k pound rise then instead of a one pound rise. This is my strategy. Better get a 10k rise and pay 6k in taxes on it than not to get a one pound rise to avoid extra taxes altogether.
  - philjohn 8y ago
    It's easy to prevent that happening by taking on salary sacrifice schemes, or even better, putting more into your pension.
- collyw 8y ago
  Do you get taxed for having a child. I was under the impression that you got tax breaks.
- philjohn 8y ago
  Slight correction - if you earn between 50,001 an 60,000 you lose child benefit, if you're on 50k you keep it all.
switch007 8y ago
Indeed, "graduate tax" has been shoved down our throats left right and centre in the media. Because who can disagree with paying a tax! It's your duty! And by changing the narrative away from debt, we can ignore any psychological affects of having large sums of debt at a young age. I was told my loan (this was before they went up to huge amounts) was affectively free because my salary would rise above inflation every year! Let's not also forget that interest rates are on a sliding scale depend on income. People earning over £45k have an extra 3% interest slapped on top of RPI, i.e. 6.1% - amazingly similar to those in the US, no? It's a noticeable sum off your take-home that isn't going towards saving for a mortgage. As another posted pointed out, look at your total take-home pay. Also, the large sums of money have gone towards lavish new facilities and over-the-top student halls of residences. It seems like students have provided investment capital for universities.

jonatron 8y ago

If you make 50k, have a child, and have a student loan, your marginal tax rate becomes 62%, that's 40% (income) +2% (NI) +9% (Loan) + 11% (child benefit reduction). I don't think that's progressive, I think it's excessive taxation.

ipsi 8y ago
It goes up to 71% at £100,000+ (then drops again at £123,700), including NI and Student Loans - maybe even over 100%, depending on how much childcare you lose out on. For example, going from £100,000 to £100,001/year immediately costs you 570 hours/year of free childcare (potentially a couple of thousand pounds per year), and all of your tax-free childcare (potentially over a thousand pounds per year). Note that this does require _one_ person in a couple to be earning over £100,000, so it's hard to have a lot of sympathy in that case - that certainly doesn't count as struggling! On the other hand, it's also not at all progressive - it comes in all at once, potentially meaning you should refuse a pay rise. It's also _very_ different to the headline tax rate of 40% that you _think_ you're paying...
- flatfilefan 8y ago
  Just ask for a 10k pound rise then instead of a one pound rise. This is my strategy. Better get a 10k rise and pay 6k in taxes on it than not to get a one pound rise to avoid extra taxes altogether.
- philjohn 8y ago
  It's easy to prevent that happening by taking on salary sacrifice schemes, or even better, putting more into your pension.
collyw 8y ago
Do you get taxed for having a child. I was under the impression that you got tax breaks.
philjohn 8y ago
Slight correction - if you earn between 50,001 an 60,000 you lose child benefit, if you're on 50k you keep it all.

switch007 8y ago

Indeed, "graduate tax" has been shoved down our throats left right and centre in the media. Because who can disagree with paying a tax! It's your duty! And by changing the narrative away from debt, we can ignore any psychological affects of having large sums of debt at a young age. I was told my loan (this was before they went up to huge amounts) was affectively free because my salary would rise above inflation every year! Let's not also forget that interest rates are on a sliding scale depend on income. People earning over £45k have an extra 3% interest slapped on top of RPI, i.e. 6.1% - amazingly similar to those in the US, no? It's a noticeable sum off your take-home that isn't going towards saving for a mortgage. As another posted pointed out, look at your total take-home pay. Also, the large sums of money have gone towards lavish new facilities and over-the-top student halls of residences. It seems like students have provided investment capital for universities.