Wednesday, 8 October 2014

Income Tax Chart 2014-15

This is an update to the charts I posted three years ago.


Tax + Employee's National Insurance:

The changes from three years ago are:

- The personal allowance has increased significantly, to £10,000.  This has the side-effect of increasing the width of the trap at an income of £100,000, where the personal allowance rolls off.  All the other income tax thresholds are unchanged (in cash terms) except that the 40% rate now starts a few hundred pounds earlier.

- The top ('additional') income tax rate has been reduced from 50% to 45%.

- The minimum income for NI contributions has not increased in line with the personal allowance, creating a kink at the left hand side of the Tax+NI chart.

I'll repeat what I wrote last time: In a rational world, we would abandon the artificial distinction between Income Tax and National Insurance. We would determine an appropriate shape for the marginal tax curve - preferably piecewise linear and non-decreasing. And we would apply a multiplier to that curve to raise what revenue the government deemed appropriate.

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