Surely we must pay more taxes!?

restrict tax relief on pension contributions in the UK to the basic rate of income tax

I really don't understand why governments are so reluctant to do that.

New pensioners receiving their lump sums had a massive state subsidy to their pensions when they made their contributions - more so if they were paying higher rate tax. They then have the cheek to moan about having to pay tax if they invest to money which was gifted to them by the government in the first place.

I've seen estimates that tax exemptions for pension contributions for higher rate taxpayers cost the Treasury at least £8 billion a year.

Mollygo

Barleyfields

That question never gets answered MOnica.

Wealthy is anyone who doesn’t need the WFA,
who can leap into an EV unconcerned about the life of the battery,
who will be unworried by the discussions about future banning of gas boilers and obliging people to have a heat pump.

The word is, of course, subjective. Nevertheless, the average (mean) income for employees (which most working age people are) was about £37.5k in the UK in 2024. There are a number of variables, but after deductions that equates to about £26k for most people. My guess is that most people need more than £6k a year to live even a frugal life, so they won't have anywhere near £20k a year to save. Crucially, that's the mean, so 50% of people have less than that. They most certainly won't be able to save £20k.

For the majority of people in the UK, anybody who doesn't have to think about heating or travel costs is wealthy. Whatever the definition of 'wealth' the fact is that at least 50% of the country most certainly isn't wealthy. In fact, they're probably juggling money around to afford the essentials and stay out of debt. I really don't see why people who don't have such precarious lives should be given a tax break by the government.

The trouble with the very wealthy is that many of them use tax havens across the world and don’t like parting with any of their money at all. Not all of them of course but a large number. Some actually flee the country ( mine too) and live elsewhere ,USA or wherever. Many pop stars used to do this and I don’t think things have changed.

I think Keynes is even sounder! He was, after all, one of the greatest economists of the 20th century.

Richard Murphy, who, among other things, was a cofounder of the Tax Justice Network many years ago, addressed the question of how to pay for defence in a recent blog.

He first of all referred to a tract written by J.M. Keynes at the start of WW2 called How to Pay for the War. Keynes made two points.
I quote from Murphy's blog: Keynes said that we must tax the rich more because they've got the money, and they must, therefore, make the sacrifice because we can't ask what he would have described as ordinary people to make that sacrifice because we're also asking them to serve in the front line to deliver the victory that we need. It was not possible to ask those people to give more than they already were, because they had nothing more to give, whereas the wealthy clearly had got more to give.

They could give more money, and they could give something else, which was their consumption. They could give up things and still live a good life, whereas those who were on low levels of income could not.

Murphy contends that what was true in 1940 is still true in 2025

It is still true that the wealthy do have the money, and the wealthy have the good life, and that there are vast numbers of people in the UK who have very little more they can give because they simply don't have enough already. So, we can use the lesson that Keynes gave us. We should be taxing the rich more because they are the people who should be paying for the peace if that is what we are trying to preserve.

Having said that he suggests tax measures which could bring in substantial sums:

restrict tax relief on pension contributions in the UK to the basic rate of income tax, so that everybody gets the same rate of tax relief however much they earn. In other words, you do not get more subsidy for your wealth if you are wealthier than you do if you are a basic rate taxpayer, which is what happens at present. We have a perverse system which actually subsidises the savings of the wealthy more than it subsidizes the savings of those who are on low incomes.

If we were simply to equalise the rate of tax relief, which I think would be a definition of fairness, that we could raise £14.5 billion

^ We could, for example, align the capital gains tax rate with the income tax rate in the UK - a perfectly sensible thing to do because both capital gains and income end up delivering pounds into people's pockets. The tax system should be indifferent as to where that pound came from. It is fair that the tax system is indifferent in that way because both income and capital gains enrich a person and there's no reason why one should be taxed less than another except for the fact that our tax system is biased to the wealthy and, basically, you've got to be wealthy to have a capital gain.^

This would ^ deliver an additional £12 billion of tax revenue to the government each year.^

we could, for example, reform corporation tax. Corporation tax is in a total mess in the UK. It isn't charged on hordes of companies.
And if we increase the rates of corporation tax in the UK for larger companies to the rates that are commonplace around the world, we could raise another seven billion pounds of corporation tax a year. From corporation tax, we could, then, raise another £19 billion, and I can keep going.

we could recreate something that we had for a long time called an investment income surcharge in the UK. This is, in effect, a national insurance charge on things other than work. Why is it, after all, that work has the highest tax rate in the UK, but if you get your income from savings, investments, rents, trust funds and everything else, well, that gets a lower tax rate? This is perverse, stupid, unreasonable, unfair, irresponsible.

This, and a lot more, is set out in the Taxing Wealth report that he published last year: taxingwealth.uk/

There is a great deal of inequity in our tax system which is biased towards enabling the wealthy to hang on to their wealth.

A week or two ago petra posted a link to a documentary called The Spider's Web. It's available on youtube and is well worth watching:
www.youtube.com/watch?v=np_ylvc8Zj8

I realise that many of us Gnet posters are very comfortably off and have some 'wealth' that we would like to protect, but what we have is chicken feed compared with the wealth which is hidden in tax havens and protected by favourable tax regimes.

www.taxresearch.org.uk/Blog/2025/02/22/how-to-pay-for-defence/

I quoted extensively because Murphy knows far more than I do and has been researching and writing about taxation for a long time. You may disagree with some things but I think his suggestions are sound.

Silverbrooks

Norah. Raising the personal tax allowance to £20,000 would cost 55 billion a year.

Please explain.

Norah. Raising the personal tax allowance to £20,000 would cost 55 billion a year.

In 1980 Margaret Thatcher's government faced a top income tax rate of 83%, which was reduced that year to 60%. The 83% was on earned income only, investment income attracted a further 15% surcharge. Successive governments whittled it down and down and despite a couple of increases in the top rate since then it has stayed pretty low in comparison.

I think most "ordinary working people" would imagine that £100k is more than high enough to attract a high rate of tax, never mind double that level of income.

Well Molly, I don’t need the WFA, I wouldn’t have an EV if you gave me one, and I already have a heat pump.

Perhaps not having the EV is my get out clause.

Silverbrooks

In 2022 there were said to be around 800,000 individuals wealthy individuals. As the gap between wealthy and poor widens, I suspect that number has increased - say a million at least.

The 45% rate currently starts at income over £125,140. Raise the rate on the top slice from £125,140 to £200,000 to 60% for a million people and you've already raised over 11 billion just from those with incomes up to £200,000.

What we need is a return to progressive rates of higher rate tax not just the 40% and 45% we have now.

Agreed.

I think the personal allowance should be £20k.

The 45% rate, above £125k (easy number) should be 50-60%.

The effect of the 45% tax band is more complex than you might think. This explains it:
www.theprivateoffice.com/insights/have-you-fallen-victim-62pc-tax-trap#:~:text=From%2520the%25206th%2520of%2520April,all%2520earnings%2520over%2520%C2%A3125%252C140.

Any higher band shouldn’t kick in at less than £200k imo.

Barleyfields

That question never gets answered MOnica.

Wealthy is anyone who doesn’t need the WFA,
who can leap into an EV unconcerned about the life of the battery,
who will be unworried by the discussions about future banning of gas boilers and obliging people to have a heat pump.

In 2022 there were said to be around 800,000 individuals wealthy individuals. As the gap between wealthy and poor widens, I suspect that number has increased - say a million at least.

The 45% rate currently starts at income over £125,140. Raise the rate on the top slice from £125,140 to £200,000 to 60% for a million people and you've already raised over 11 billion just from those with incomes up to £200,000.

What we need is a return to progressive rates of higher rate tax not just the 40% and 45% we have now.

I had hoped that Labour would increase taxes when they were elected so we would have a functioning care system, NHS, schools, defence etc.

Struthruth

We need substantially more money for defence, I would suggest that the population would be more prepared to see an increase in income tax, than to decimate public services more or cut back on infrastructure/social care etc.

Perhaps more controversially tax tec companies, the super rich etc to reduce the disparity between rich and poor.

Trying to bring much needed change to our struggling country plus the extra but necessary burden of defence costs without extra funds will just cripple us and we will become a country of ‘pot holes’.

Over to you…..

I agree and have been saying on this forum and to anyone willing to listen that Labour should never have promised not to increase taxation before the GE, a huge mistake.
Now however, increasing defence spending gives them a get out clause, raise our taxes and use it for defence and anything else.Am sure people will understand as defence spending is being very much talked about on the news.

The NAO currrently has work in progress: Collecting the right tax from wealthy individuals with the report scheduled for Spring 2025.

I see it says: HMRC no longer has a specific unit to manage high net worth individuals (the wealthiest taxpayers) and instead manages them as part of its overall approach to wealthy taxpayers.

www.nao.org.uk/work-in-progress/collecting-the-right-tax-from-wealthy-individuals/

£200k income or £2m assets?

I would suggest that’s too high to gain enough taxation from individuals because a couple would be double that. If you have assets of £1m (£2 for a couple) you are wealthy and don’t need state help.

£2m for a couple is double the inheritance tax threshold, they certainly don’t need state benefits at all.

I agree Cossy

Silverbrooks

In September 2023, in response to a FOI request to know the amount of tax paid by high net worth individuals (defined as individuals with a net worth of more than £20 million), the National Audit Office responded that:

HMRC now defines individuals as ‘wealthy’ if they have incomes of £200,000 or more, or assets equal to or above £2 million in any of the last 3 years.

www.nao.org.uk/wp-content/uploads/2024/01/FOI-1655.pdf

Good to know.

Thank you for the link.

M0nica

Please could someone define what they mean by wealthy.

What size of income? what value of assets?

Yes, this.

Should read the entire thread before I post.

pascal30

Perhaps this ineffectual finance minister could take the radical and obvious step of taxing the wealthy!!!

Please define wealthy.

I agree with you Struthruth, but it would seem that everyone who has been in power in the last 15 years thinks that nobody will vote for them if taxes are increased.

Public services fail all around us, hospitals treat people in corridors, the roads are full of potholes - but that's fine because taxes are low.

You only have to see the threads on IHT to realise how much some people do not want to pay tax, even on money they've not worked to earn.

Silverbrooks

In September 2023, in response to a FOI request to know the amount of tax paid by high net worth individuals (defined as individuals with a net worth of more than £20 million), the National Audit Office responded that:

HMRC now defines individuals as ‘wealthy’ if they have incomes of £200,000 or more, or assets equal to or above £2 million in any of the last 3 years.

www.nao.org.uk/wp-content/uploads/2024/01/FOI-1655.pdf

I would consider that pretty fair!

In September 2023, in response to a FOI request to know the amount of tax paid by high net worth individuals (defined as individuals with a net worth of more than £20 million), the National Audit Office responded that:

HMRC now defines individuals as ‘wealthy’ if they have incomes of £200,000 or more, or assets equal to or above £2 million in any of the last 3 years.

www.nao.org.uk/wp-content/uploads/2024/01/FOI-1655.pdf

That question never gets answered MOnica.