The figures just don't add up
In the UK the cost of tax on single income, higher earners appears unfairly weighted and penalises them for being a household with a single earner.
A friend of mine has worked really hard throughout his life and taken decisions to get him to where he is, which is earning a very decent wage compared to the average - over £100k per year.
After tax and national insurance the gov.uk website estimates take home pay each month on £100k per year to be £5587.75 per month.
Shared household income is twice as nice.
Another friend of mine and his wife are on perhaps a similar total annual income to my first friend but the figures are completely different.
Let's keep it simple and say that my other two friends are earning £50k each for a total household income of £100k the same as my first friend.
According to the gov.uk website, the estimated monthly income for them after income tax and national insurance would be £3168.69 per month. EACH.
That means for the couple earning the same total income they will receive a combined income of £6337.38 - a full £749.63 each month difference!
So if you're a higher income single earner, the figures really don't add up the same. How can this be the case and how is this fair. Firstly, the impact of the tax free allowance given to each of the earners on £50k per year is substantial as they will receive 100% relief on £12,570 x 2 or £25,140. My friend on £100k per year will get half that allowance on the same earnings (with a small amount possible to claw back from married persons allowance).
What kind of message does this send to the population? Furthermore, once you start looking at benefits on top of this, the difference gets more extreme. For earners over £100k per year they will not receive the tax free childcare credits and additionally, over £100k you begin to lose £1 for every £2 that your adjusted net income is above £100k.
It seems pretty clear that it is worth people investing some time in considering these issues and consulting a tax accountant or financial planner regarding your individual circumstances. This is not financial advice, merely an observation on how things appear to be.
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