Letter: Lots of inequities in our massively overcomplicated tax system

Green Party Councilor David Noland laments differential National Insurance rates, saying those earning just over £50,000 only pay 3.25% NI on earnings above that figure and calling out to pay 13.25% instead. (Craven Herald, January 27).

He is either woefully ignorant of income tax rates or deliberately dishonest; any comparison of taxes across income brackets, whether it’s IR or personal income tax, must certainly consider the whole picture.

Those lucky enough to earn more than £50,271 face a 20% to 40% increase in their income tax on income above this threshold. So the effective rate of tax for them on income over £50,000 is (or will be after the NI rise) is 43.25%, which is the sum of income tax and NI. For those earning over £150,000 the effective tax rate is 48.25%.

There are many inequities in our massively over-complicated tax system, including the loss of personal allowance on a declining basis for those earning over £100,000. However, the idea that high earners don’t pay enough tax on their income is a bit of a myth, no matter how popular it is on the doorstep.

This week’s announcement that Bet365 owner Denise Coates paid £480m in Treasury tax last year shows that many very wealthy people are paying their UK taxes in full. I’m no apologist for her, but one wonders if she would be happy to continue to operate her business outside the UK and employ the thousands of UK citizens she employs, if tax rates were still increased for high earners. Companies like his could just as well operate as offshore entities, to the detriment of the UK economy and the state’s ability to fund public spending on schools, hospitals, police etc. At the top, there is always a tipping point when tax rate increases actually start raising less tax.

Richard Lowe


Comments are closed.