40% tax rate

Glad to see this is becoming an issue.

Suppose someone just nudges into the 40% tax rate with a family to support on one income, and is paying their student loan off. If they earn £1 extra, they see just 48p of that*. That's ignoring employer's NI, the burden of which largely falls on the employee, and ignores council tax. The total probably leaves them about 40p in the pound. Our hypothetical wage slave is renting and trying to save for a deposit for a house, can barely think about contributing to a pension, and probably can't think about holidays or luxuries. No wonder they might be thinking about emigrating somewhere more sympathetic to the idea of getting established first and paying shitloads of tax second. Plus then they could aspire to live somewhere less cramped and expensive.

The stats are interesting. When the 40p rate was introduced, 1 in 20 paid it, now it's 1 in 6, because of the usual fiscal drag - thresholds not keeping up with inflation. Another interesting one is that a household with a single top fifth earner (as in 80% of individuals earn less), results in a household income that is in the bottom half! Households are reliant on multiple earners and the state is geared up to taxing on that basis.

* From listentotaxman.com, student loan deduction ticked, no pension. A figure of £42,500 used, then added £20 to work out marginal change.