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The top marginal rate of income tax (above c122k of income since this year) is 45%. On top of that, if you are employed and below state pension age then you als

The top marginal rate of income tax (above c122k of income since this year) is 45%. On top of that, if you are employed and below state pension age then you also pay employee National Insurance of 2% and your employer also pays 13.8%. So for every additional £1 spent on salary and payroll taxes by an employer, c.53.4% goes on direct taxation. Rates are actually even higher between 100-122k because although the income tax rate is 40%, ie 5%pts lower, the zero-rate band ("Personal Allowance") is simultaneously withdrawn by 50p for every pound earned - meaning effectively the rate is 60% and employees get to keep just over 33% of each additional pound the employer spends on salary and payroll taxes. On the other hand, if you can take all of your money in capital gains, you'll be taxed at a top rate of 20% (or 28% for real estate and carried interest), with no payroll taxes. So the system heavily incentivises risk taking.

midasuni 3y ago
If you have two kids and earn 55k from work, you pay marginal tax of 60%, as you have to pay a child tax on top of income and national insurance, plus another 9% or 15% on student loans (which are funded as an income tax)
- jen20 3y ago
  … what? If you’re going to make the (extraordinary) claim that there is a “child tax” you’ll need to provide a link to a primary source.
  - tomatocracy 3y ago
    This is what is being referred to: https://www.gov.uk/child-benefit-tax-charge https://www.gov.uk/child-benefit-tax-charge
- tomatocracy 3y ago
  Yes, although that could be classed as a benefit withdrawal rather than a tax (the child benefit clawback), though I'd agree with calling student loans effectively a graduate tax under the current system (since very few would expect to ever fully repay them). More broadly benefit withdrawal rates are another horror show which create all sorts of bad incentives in the UK - the withdrawal rate for universal credit is 55% on post-tax income above the "work allowance". That can mean marginal combined tax and benefit withdrawal rates into the high 60s% for some of the lowest-paid workers!
  - midasuni 3y ago
    Except the benefit isn’t withdrawn. This is especially seen when you have parent who have split up. One parent receives the benefit, the other pays extra tax.

midasuni 3y ago

If you have two kids and earn 55k from work, you pay marginal tax of 60%, as you have to pay a child tax on top of income and national insurance, plus another 9% or 15% on student loans (which are funded as an income tax)

jen20 3y ago
… what? If you’re going to make the (extraordinary) claim that there is a “child tax” you’ll need to provide a link to a primary source.
- tomatocracy 3y ago
  This is what is being referred to: https://www.gov.uk/child-benefit-tax-charge https://www.gov.uk/child-benefit-tax-charge
tomatocracy 3y ago
Yes, although that could be classed as a benefit withdrawal rather than a tax (the child benefit clawback), though I'd agree with calling student loans effectively a graduate tax under the current system (since very few would expect to ever fully repay them). More broadly benefit withdrawal rates are another horror show which create all sorts of bad incentives in the UK - the withdrawal rate for universal credit is 55% on post-tax income above the "work allowance". That can mean marginal combined tax and benefit withdrawal rates into the high 60s% for some of the lowest-paid workers!
- midasuni 3y ago
  Except the benefit isn’t withdrawn. This is especially seen when you have parent who have split up. One parent receives the benefit, the other pays extra tax.