[dan-robertson]

I don’t understand your logic? It sounds like you’re saying you changed jobs for less money so that your marginal tax rate would be lower even though your net income would be lower. In theory you could also change jobs to something that pays £125k where your marginal tax rate would be back down to 40%, though obviously you’d need to find such a job. You specifically wrote ‘marginal’ so I don’t think you’re confused between marginal and effective tax rates so are you suggesting that the 60p rate did not provide sufficient incentives for you to try to get paid more? That would maybe make sense but I think it can also be useful to think of pay raises on a logarithmic scale rather than a linear one (as in an equal amount of raise-worthiness would be expected to lead to a proportionally larger raise in absolute terms if your starting pay is higher), which would mean an x% raise at a higher marginal tax rate may still be worth it if your starting pay is higher. But then another common model is log utility for money which cancels out that effect.

It’s fair enough if you want to work at the startup but this seems like a strange rationalisation. I agree that the 60% marginal rate from the personal allowance reduction is kinda silly.

[bigfudge]

In what circumstances the does UK have a 60% marginal tax rate. I think the op is confused.

[tikkabhuna]

Between £100k and £125k your personal allowance is reduced to £0, so for every £1 you gain, you lose more of that allowance and that works out to a 20% reduction. That on top of the 40% rate equals 60%.

[wave_function]

If I’m understanding correctly, that makes the effective marginal tax rate between 100k and 125k higher than after 125k? Feels kind of crazy

[MattPalmer1086]

That's correct.

Most people in the UK have no idea that there is an effective 60% tax rate either. It's not an official tax band.

But it's the kind of tax raising governments love doing, by stealth. Don't put up the tax band thresholds causing more people to fall into the higher bands over time. They also remove child tax credit as you earn more. And remove your personal tax allowance gradually over 100k.

[dan-robertson]

> And remove your personal tax allowance gradually over 100k.

Well the that’s the thing this thread is all about so that isn’t an additional thing.

[MattPalmer1086]

Yeah, bad phrasing! I'm sure there are other examples of stealth taxation.

[bigfudge]

Apologies. I hadn’t realised this was the net effect.

I agree this is a terrible policy. Marginal tax rates should be a monotonically increasing function.