A few years ago I wouldn't have considered writing a goal like this. But, I've found that setting goals and working towards them has broadened my perspective.
I'm now earning what I feel is a reasonable amount for my experience and skills but I'm conscious that despite the increase in my earnings over the last few years, the extra money I make doesn't go much further than it used to. Inflation will play a part as will changes in our family and lifestyle but I've come to realise that tax plays a huge role in reducing my income.
Below is a table showing income and associated tax for an individual earning an increasing amount of money. I've assumed some of the tax based on my own situation and that some taxes will remain stable which in reality - in the case of council tax for instance - I doubt would be the case: earn more, move house, pay more...
|Insurance premium tax||£20||£20||£20||£20||£20||£20|
|Car road tax||£200||£200||£200||£200||£200||£200|
What I find fascinating in the above calculation is that the tax burden is almost unchanged from a person earning £20,000 to someone earning £100,000. (This is taking into account the personal allowance)
How can this be? How can our government honestly justify taking the same percentage of tax from people earning such vastly different amounts?
There is a radical difference in the tax burden when you factor in tax allowances for those supporting children:
|Working families tax credit||£6,000||£4,000||£1,000||£0||£0||£0|
|Income after reductions/benefits|
I currently receive child benefit and over several years have appreciated receiving tax credits but there still seems something very wrong with a society where an individual cannot earn enough to provide for themselves and their family without having to receive a bailout from the State.
What these tables tell me is our government does not want to encourage people to work harder and earn more. The reward for earning more in our country is to be taxed higher and higher.
What signal does this send out?
I believe the government provides some essential and neccessary services and can greatly provide for society through economies of scale but I want the right to decide where the money I work for goes. I want to see the fruit of my labour and decide for myself how to spend, save, invest or give that money.
I've made assumptions with all the above figures but the rates of tax and national insurance are taken directly from the UK Inland Revenue site. I am happy to share the formulas used.
How do you feel about how much you are taxed?