5 ms·

I'm from the UK so the section "What percentage of your salary goes to taxes?" seemed perfectly normal to me. The way the "comment from the editor" is written

I'm from the UK so the section "What percentage of your salary goes to taxes?" seemed perfectly normal to me. The way the "comment from the editor" is written ("Unfortunately, in England, higher salaries will mean higher tax rates." and "England's tax brackets can be slightly confusing") make it sound like this is not commonly how it works in other counties. Could anyone tell me about how this differs from where you are?

StavrosK 5y ago
I definitely can't, I haven't seen a country where it doesn't work the same way as in the UK. I suspect the author gets confused by the tiered tax rates the same way everyone is, where they think that if you make 45,001 GBP, you are now going to pay more tax on the entire amount, rather than just the extra GBP.
- yrro 5y ago
  It's astounding that people smart enough to land a job that pays enough to push them into the higher rate band of income tax are so often confused about how their taxes are actually calculated!
  - fastball 5y ago
    Not really. At least in the US, the tax code is lobbied to be kept intentionally confusing so that TurboTax et al can continue to make a lot of money off doing it for you.
  - pavlov 5y ago
    It's hard to make a man understand something that conflicts with his ideological preconception that the government must be ripping him off.
  - TheCabin 5y ago
    Sadly many countries have 0 education on this topic and it might not be straightforward to get hold on good information about the subject.
  - hughrr 5y ago
    Most salaried people tend not to even bother understanding it from what I have seen. Magic money arrives in their account and that’s it. If I explain to the same people that I use a spreadsheet for all my daily transactions I am looked at like I’m some kind of weirdo.
  - BerislavLopac 5y ago
    The UK taxes are, in all fairness, the simplest I have ever seen (and I've made a point of learning about and comparing several countries). You can use a calculator such as Listen To Taxman [0] and be within a 1% error margin from the reality. Of course, there are always edge cases, and the government has deliberately made some areas a mess (case in point: contractors); but the base use case of standard salary is insanely simple. And, for our American friends, the NHS is included. [0] https://listentotaxman.com/ https://listentotaxman.com/
- pedrosorio 5y ago
  This section of the article has a detailed explanation on tax brackets in the UK, including a worked example for an "average software developer salary", so this is clearly not the case.
varjag 5y ago
I believe Russia has the flat rate income tax. The author applied for visa in Tehran, so possibly that's how it's in Iran as well.
emteycz 5y ago
Many European countries have flat rates.
- andi999 5y ago
  Citation needed
  - deleted 5y ago
    [deleted]
- pedrosorio 5y ago
  I count 7 here, not what I would call many in a continent with 50 countries: https://en.wikipedia.org/wiki/Flat_tax#Jurisdictions_that_have_a_flat_tax_on_personal_income https://en.wikipedia.org/wiki/Flat_tax#Jurisdictions_that_ha...
  - fastball 5y ago
    I'd call seven "many". Many is more than "a few", which I'd say is =< 5. The total number of countries (50) only matters if you're using relative terms, like "most".
    - pedrosorio 5y ago
      I disagree that the total number does not influence the usage of the term many. In the middle of the desert outside of a population center, one might call a group of 6 people "many", but one would never use the same term to refer to 6 grains of sand.
      - andi999 5y ago
        The total number is very important. Otherwise you could say: many (insert minority group) commit hideous crimes.
  - indigomm 5y ago
    The Walpiri would disagree - https://numberwarrior.wordpress.com/2010/07/30/is-one-two-many-a-myth/ https://numberwarrior.wordpress.com/2010/07/30/is-one-two-ma...
ChuckNorris89 5y ago
Romania for example has a flat rate income tax for everyone regardless of income so you can just negotiate your NET salary directly.
- Hard_Space 5y ago
  This is true. I was also amazed to find in Romania that the salaries quoted are 'net' by default. I don't know of any other country that does this.
  - BerislavLopac 5y ago
    Croatia is a very special case. The salaries are quoted as "neto" (net), but the taxes are actually quite complicated. There is a so-called "bruto" (gross) figure, which is the formal one (e.g. it's used for employment contracts) and includes taxes - _just not all of them!_ So the actual amount that a company pays for an employee is the unofficial so-called "bruto 2", which includes some taxes that are calculated based on the "bruto" amount, meaning that it taxes the taxes. The most commonly used salary calculator [0] does a good job of taking all of that into account, so you can clearly see all three actual figures. [0] https://www.moj-posao.net/Salary-Calculator/ https://www.moj-posao.net/Salary-Calculator/
- deleted 5y ago
  [deleted]
- TechBro8615 5y ago
  You can negotiate your net salary in graduated tax regimes as well. The math isn’t as clean, but as long as the tax calculation is deterministic, you can negotiate a salary so that you get a nice round number in your bank account every month. For some reason this isn’t common practice. I’ve always found it weird that salaries are quoted in gross amount. In some cases the round number may not be the “net” amount because eg maybe you have some rental income, or income from last year, moved to a new state, etc. But in most cases it’ll be pretty close.
pharmakom 5y ago
One of the good things about UK taxes is that you don’t have to calculate them yourself and file a return. They are calculated by your employer and deducted from your salary.
- azornathogron 5y ago
  It's generally a good idea to check them yourself as well. HMRC does sometimes make mistakes with people's tax codes, resulting in the wrong amount being taken off your pay, and your employer doesn't (and can't) correct those mistakes for you. Usually when there's a mistake it will eventually be corrected automatically by HMRC but that can leave you with an unexpected extra tax bill (or a refund, which is usually less of a problem), but those corrections happen months after the end of the tax year. Also if you pass a certain income threshold you're required to fill in your own tax return anyway.
  - sneakymichael 5y ago
    Can attest to being bitten by an unexpected tax bill, after a previous employer years before had the wrong tax info for me.
  - BerislavLopac 5y ago
    > HMRC does sometimes make mistakes with people's tax codes, resulting in > the wrong amount being taken off your pay, and your employer doesn't > (and can't) correct those mistakes for you That is correct. However, HMRC sends you a letter with every tax code change, which is calculated and posted automatically; I've once received two separate letters, with two different tax codes, sent literally one day apart from each other. :D And if you feel that you tax code is incorrect it is very easy to check your online HNRC account and correct any information they might have.
- salmonlogs 5y ago
  Anyone earning £100,000+ in the UK does have to file a return, however most of the calculations are done for you. Your employer handles all deductions from your payslip and gives you a summary form of all tax paid, which you then report in your tax return with additional details that might affect your taxes such as capital gains, additional pension contributions or investment and rental income.
pedrosorio 5y ago
Even more confusing is that the full quote at the beginning of that paragraph mentions capital gains tax right after: "Unfortunately, in England, higher salaries will mean higher tax rates. Data released late in 2020 showed that Londoners contribute to nearly 30% of the country's capital gains tax" ??? Either the author mistakenly wrote capital gains instead of income, or they were just citing something completely irrelevant to the discussion. Regarding the "confusing progressive tax rates", I agree with you. "Most systems around the world contain progressive aspects." [0] And a look at "tax rates around the world" shows most countries have higher marginal tax rates for higher incomes [1] [0] https://en.wikipedia.org/wiki/Progressive_tax#Examples https://en.wikipedia.org/wiki/Progressive_tax#Examples [1] https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates
dkdbejwi383 5y ago
I found the wording "Unfortunately, in England, higher salaries will mean higher tax rates" to be slightly strange. To me, it's fortunate that those who earn less pay lower taxes than those of us who can afford more.
indigomm 5y ago
There are the advertised tax brackets, and then there are the effective ones. The effective ones are: 0-£12,570 (0%) £12,571-£50,270 (20%) £50,271-£99,999 (40%) £100,000-£125,140 (60%) £125,141-£150,000 (40%) £150,001+ (45%) The 60% arrises because your personal allowance is reduced by £1 for every £2 you earn over £100,000 until is disappears entirely.
- yrro 5y ago
  Here's a nice chart that shows what % of tax you pay in combined income tax & national insurance (blue line) https://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom#/media/File:Percentage_IT_and_NI_and_Marginal_Taxrate.png https://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom... And here's a chart to go along with it to show where people fit along the X axis: https://en.wikipedia.org/wiki/Income_in_the_United_Kingdom#/media/File:Number_of_Individuals_in_the_UK_by_Total_PreTax_Income.png https://en.wikipedia.org/wiki/Income_in_the_United_Kingdom#/...
- Silhouette 5y ago
  But then you have to factor in National Insurance contributions, which also have a (different) threshold below which they don't cost anything, then cost you 12% up to around the £50K mark, then cost you 2% over that. And even that isn't quite the whole story, because you'll also lose certain child-related benefits starting from £50K if you have kids, so your effective rate for the next £10K or so can work out much higher than 40%. Then there are the effects of not-unusual things like pension contributions and charitable donations, which can move things around a bit more. It's hardly a surprise that people find the system confusing!
calpaterson 5y ago
I think 25% is an underestimate. A typical tax level for someone on a professional salary in the UK is something like 30-35%. Remember there is the higher rate of income tax, NI, council tax, and so on. Most people never interact with capital gains tax in their lives.
- TheOtherHobbes 5y ago
  Well-paid freelance developers usually IR35 - set up a limited company, pay themselves the smallest possible salary which avoids National Insurance contributions, and take the rest as dividends. This used to be an easy way to minimise tax, although now it's a more complex calculation. And HMRC have to be persuaded that you really are freelance, and not just a long-term contractor working on-site. There other semi-legal dodges including companies which loan you your income - minimal tax - and then for various more or less credible reasons the loan is written off and never has to be repaid. HMRC usually take a while to catch to these kinds of schemes. But short term gain can lead to long-term pain because if they're ruled unlawful HMRC can claw back tax retrospectively. I moved out of the UK a few years ago, and while there's a lot to dislike - which is why I moved - the tax laws are fairly generous to one-person small businesses. Brexit has now massively complicated this for anyone selling internationally, but UK B2B is not so bad.
  - BerislavLopac 5y ago
    IR35 has ben completely messed up recently.

StavrosK 5y ago

I definitely can't, I haven't seen a country where it doesn't work the same way as in the UK. I suspect the author gets confused by the tiered tax rates the same way everyone is, where they think that if you make 45,001 GBP, you are now going to pay more tax on the entire amount, rather than just the extra GBP.

yrro 5y ago
It's astounding that people smart enough to land a job that pays enough to push them into the higher rate band of income tax are so often confused about how their taxes are actually calculated!
- fastball 5y ago
  Not really. At least in the US, the tax code is lobbied to be kept intentionally confusing so that TurboTax et al can continue to make a lot of money off doing it for you.
- pavlov 5y ago
  It's hard to make a man understand something that conflicts with his ideological preconception that the government must be ripping him off.
- TheCabin 5y ago
  Sadly many countries have 0 education on this topic and it might not be straightforward to get hold on good information about the subject.
- hughrr 5y ago
  Most salaried people tend not to even bother understanding it from what I have seen. Magic money arrives in their account and that’s it. If I explain to the same people that I use a spreadsheet for all my daily transactions I am looked at like I’m some kind of weirdo.
- BerislavLopac 5y ago
  The UK taxes are, in all fairness, the simplest I have ever seen (and I've made a point of learning about and comparing several countries). You can use a calculator such as Listen To Taxman [0] and be within a 1% error margin from the reality. Of course, there are always edge cases, and the government has deliberately made some areas a mess (case in point: contractors); but the base use case of standard salary is insanely simple. And, for our American friends, the NHS is included. [0] https://listentotaxman.com/ https://listentotaxman.com/
pedrosorio 5y ago
This section of the article has a detailed explanation on tax brackets in the UK, including a worked example for an "average software developer salary", so this is clearly not the case.

varjag 5y ago

I believe Russia has the flat rate income tax. The author applied for visa in Tehran, so possibly that's how it's in Iran as well.

emteycz 5y ago

Many European countries have flat rates.

andi999 5y ago
Citation needed
- deleted 5y ago
  [deleted]
pedrosorio 5y ago
I count 7 here, not what I would call many in a continent with 50 countries: https://en.wikipedia.org/wiki/Flat_tax#Jurisdictions_that_have_a_flat_tax_on_personal_income https://en.wikipedia.org/wiki/Flat_tax#Jurisdictions_that_ha...
- fastball 5y ago
  I'd call seven "many". Many is more than "a few", which I'd say is =< 5. The total number of countries (50) only matters if you're using relative terms, like "most".
  - pedrosorio 5y ago
    I disagree that the total number does not influence the usage of the term many. In the middle of the desert outside of a population center, one might call a group of 6 people "many", but one would never use the same term to refer to 6 grains of sand.
    - andi999 5y ago
      The total number is very important. Otherwise you could say: many (insert minority group) commit hideous crimes.
- indigomm 5y ago
  The Walpiri would disagree - https://numberwarrior.wordpress.com/2010/07/30/is-one-two-many-a-myth/ https://numberwarrior.wordpress.com/2010/07/30/is-one-two-ma...

ChuckNorris89 5y ago

Romania for example has a flat rate income tax for everyone regardless of income so you can just negotiate your NET salary directly.

Hard_Space 5y ago
This is true. I was also amazed to find in Romania that the salaries quoted are 'net' by default. I don't know of any other country that does this.
- BerislavLopac 5y ago
  Croatia is a very special case. The salaries are quoted as "neto" (net), but the taxes are actually quite complicated. There is a so-called "bruto" (gross) figure, which is the formal one (e.g. it's used for employment contracts) and includes taxes - _just not all of them!_ So the actual amount that a company pays for an employee is the unofficial so-called "bruto 2", which includes some taxes that are calculated based on the "bruto" amount, meaning that it taxes the taxes. The most commonly used salary calculator [0] does a good job of taking all of that into account, so you can clearly see all three actual figures. [0] https://www.moj-posao.net/Salary-Calculator/ https://www.moj-posao.net/Salary-Calculator/
deleted 5y ago
[deleted]
TechBro8615 5y ago
You can negotiate your net salary in graduated tax regimes as well. The math isn’t as clean, but as long as the tax calculation is deterministic, you can negotiate a salary so that you get a nice round number in your bank account every month. For some reason this isn’t common practice. I’ve always found it weird that salaries are quoted in gross amount. In some cases the round number may not be the “net” amount because eg maybe you have some rental income, or income from last year, moved to a new state, etc. But in most cases it’ll be pretty close.

pharmakom 5y ago

One of the good things about UK taxes is that you don’t have to calculate them yourself and file a return. They are calculated by your employer and deducted from your salary.

azornathogron 5y ago
It's generally a good idea to check them yourself as well. HMRC does sometimes make mistakes with people's tax codes, resulting in the wrong amount being taken off your pay, and your employer doesn't (and can't) correct those mistakes for you. Usually when there's a mistake it will eventually be corrected automatically by HMRC but that can leave you with an unexpected extra tax bill (or a refund, which is usually less of a problem), but those corrections happen months after the end of the tax year. Also if you pass a certain income threshold you're required to fill in your own tax return anyway.
- sneakymichael 5y ago
  Can attest to being bitten by an unexpected tax bill, after a previous employer years before had the wrong tax info for me.
- BerislavLopac 5y ago
  > HMRC does sometimes make mistakes with people's tax codes, resulting in > the wrong amount being taken off your pay, and your employer doesn't > (and can't) correct those mistakes for you That is correct. However, HMRC sends you a letter with every tax code change, which is calculated and posted automatically; I've once received two separate letters, with two different tax codes, sent literally one day apart from each other. :D And if you feel that you tax code is incorrect it is very easy to check your online HNRC account and correct any information they might have.
salmonlogs 5y ago
Anyone earning £100,000+ in the UK does have to file a return, however most of the calculations are done for you. Your employer handles all deductions from your payslip and gives you a summary form of all tax paid, which you then report in your tax return with additional details that might affect your taxes such as capital gains, additional pension contributions or investment and rental income.

pedrosorio 5y ago

Even more confusing is that the full quote at the beginning of that paragraph mentions capital gains tax right after: "Unfortunately, in England, higher salaries will mean higher tax rates. Data released late in 2020 showed that Londoners contribute to nearly 30% of the country's capital gains tax" ??? Either the author mistakenly wrote capital gains instead of income, or they were just citing something completely irrelevant to the discussion. Regarding the "confusing progressive tax rates", I agree with you. "Most systems around the world contain progressive aspects." [0] And a look at "tax rates around the world" shows most countries have higher marginal tax rates for higher incomes [1] [0] https://en.wikipedia.org/wiki/Progressive_tax#Examples https://en.wikipedia.org/wiki/Progressive_tax#Examples [1] https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates https://en.wikipedia.org/wiki/List_of_countries_by_tax_rates

dkdbejwi383 5y ago

I found the wording "Unfortunately, in England, higher salaries will mean higher tax rates" to be slightly strange. To me, it's fortunate that those who earn less pay lower taxes than those of us who can afford more.

indigomm 5y ago

There are the advertised tax brackets, and then there are the effective ones. The effective ones are: 0-£12,570 (0%) £12,571-£50,270 (20%) £50,271-£99,999 (40%) £100,000-£125,140 (60%) £125,141-£150,000 (40%) £150,001+ (45%) The 60% arrises because your personal allowance is reduced by £1 for every £2 you earn over £100,000 until is disappears entirely.

yrro 5y ago
Here's a nice chart that shows what % of tax you pay in combined income tax & national insurance (blue line) https://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom#/media/File:Percentage_IT_and_NI_and_Marginal_Taxrate.png https://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom... And here's a chart to go along with it to show where people fit along the X axis: https://en.wikipedia.org/wiki/Income_in_the_United_Kingdom#/media/File:Number_of_Individuals_in_the_UK_by_Total_PreTax_Income.png https://en.wikipedia.org/wiki/Income_in_the_United_Kingdom#/...
Silhouette 5y ago
But then you have to factor in National Insurance contributions, which also have a (different) threshold below which they don't cost anything, then cost you 12% up to around the £50K mark, then cost you 2% over that. And even that isn't quite the whole story, because you'll also lose certain child-related benefits starting from £50K if you have kids, so your effective rate for the next £10K or so can work out much higher than 40%. Then there are the effects of not-unusual things like pension contributions and charitable donations, which can move things around a bit more. It's hardly a surprise that people find the system confusing!

calpaterson 5y ago

I think 25% is an underestimate. A typical tax level for someone on a professional salary in the UK is something like 30-35%. Remember there is the higher rate of income tax, NI, council tax, and so on. Most people never interact with capital gains tax in their lives.

TheOtherHobbes 5y ago
Well-paid freelance developers usually IR35 - set up a limited company, pay themselves the smallest possible salary which avoids National Insurance contributions, and take the rest as dividends. This used to be an easy way to minimise tax, although now it's a more complex calculation. And HMRC have to be persuaded that you really are freelance, and not just a long-term contractor working on-site. There other semi-legal dodges including companies which loan you your income - minimal tax - and then for various more or less credible reasons the loan is written off and never has to be repaid. HMRC usually take a while to catch to these kinds of schemes. But short term gain can lead to long-term pain because if they're ruled unlawful HMRC can claw back tax retrospectively. I moved out of the UK a few years ago, and while there's a lot to dislike - which is why I moved - the tax laws are fairly generous to one-person small businesses. Brexit has now massively complicated this for anyone selling internationally, but UK B2B is not so bad.
- BerislavLopac 5y ago
  IR35 has ben completely messed up recently.