Do High Earners pay enough tax? | UK Income Tax | World Affairs | Uk Current Affairs | Tax rates | Belware
Do high-earners pay enough tax? By Belware Staff
For most of us, the tax man is like an unwanted party guest – you know, the kind
that walks around with an almost empty glass hoping to bump into someone on their
way to the bar. In reality, though, the burden of income tax is a lot tougher to
tolerate than a tight-fisted gate-crasher, especially when that burden is not endured
to equal extent by others in society.
Paying income (and other) taxes is necessary if we are to collectively afford a well-functioning country.
But, with increased demand for public money in recent years, should the government turn
to its wealthier citizens for more cash?
Current Rate of Income Tax
Most people in the UK will pay what is known as the ‘basic rate’ of income tax, which means that 20%
of everything they earn above £11,000 and below £43,000 is payable to HMRC – this money
usually gets deducted from a person’s gross pay before they see it. Now, consider (if you
need to) what this means for ‘normal’ working people in the UK.
For someone earning a slightly above average annual salary of £30,000, they’re likely to pay £3,800 in income tax (plus around £2,600 in National Insurance contributions) over the year. This means that instead of taking home £2,500 per month, income tax and National Insurance deductions will result in the worker getting less than £2,000 per month (which is considered to be an above-average net monthly income for the UK).
Now consider the income tax deductions for someone earning above £43,000 per year. Known as the ‘higher rate' of income tax, the amount someone would pay for earnings between £43,000 and £150,000 is equal to 40%. This means that nearly half of the person’s income above £43k is being deducted from their monthly take home pay. To put this into context, someone earning £50,000 per year would pay a total of £9,200 in income tax over the period, plus an additional £4,333 in NI contributions. This means that despite receiving a gross income of £4,167 per month, that person would only take home around £3,000 per month.
Finally, consider the very well paid in society. The £100k plus earners. Such salaries are usually consigned to business executives, doctors, lawyers and other seasoned professionals. However, whilst £100,000 may seem to be a lot of money to a lot of people, the reality is that a huge proportion (almost a third) of their annual income is paid in income tax. And, when coupled with National Insurance contribution, the annual amount automatically deducted from their pay is about £34,500.
Should high-earners pay more than they do now?
Whilst high-earners are having to sacrifice a much larger proportion of their income to support Government revenue, this doesn’t mean they are utterly hard done by. For example, in the previous example of the person earning £100,000 per year: whilst he will have to pay more than £2,400 per month to the tax man, he would still receive nearly £5,500 per month (net of income tax and NI contributions). This is more than many people earn each quarter – but does that mean he should pay more tax than he is already paying now?
There is an argument that the man would have had to work towards securing an income of this size, through years of hard work and sacrifice. It may also be the case that this man’s job means he has a great deal of responsibility, which requires him to work longer than usual hours and/or be available around the clock.
The question may be, then, not: ‘should high-earners pay more tax’, but rather, ‘what would be the incentive for people to work hard and make sacrifice to achieve a good income, if taxes were to increase further in the future?’
Tell us what you think in the comments section below.