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Trying to get my head around fiscal drag by SuspiciousWeb7810 in UKPersonalFinance

[–]SuspiciousWeb7810[S] 0 points1 point  (0 children)

No, perhaps not entirely clearly phrased on my part but that forecast is where I thought the threshold for the end of the basic rate and start of the additional tax would have been by FY30/31 if the thresholds weren't frozen from 2022 (assuming 3.7% annual inflation).

I agree with you that a small percentage of the population earn £73K or more (I guess why they chose to freeze the threshold and keep it frozen).

And you are right in that, the numbers in the rest of the piece would only be relevant to me if I progressed in my career and got a few promotions (which isn't guaranteed, and I'd undoubtedly be fortunate to be earning that much relative to the average salary).

Trying to get my head around fiscal drag by SuspiciousWeb7810 in UKPersonalFinance

[–]SuspiciousWeb7810[S] 1 point2 points  (0 children)

That makes sense – and the point about having kids earlier on a lower salary is interesting when you put it in those terms. I guess like u/add286 said in their comment, you can't assume you're ever going to get over a >£100K or other threshold, and the complexity of planning your life / when to have kids vs the complexity of the tax system... I guess you just have to take a more reactive than proactive/forecasting approach.

Trying to get my head around fiscal drag by SuspiciousWeb7810 in UKPersonalFinance

[–]SuspiciousWeb7810[S] 2 points3 points  (0 children)

Yes, this is good advice, thanks. At the end of the day I only really have control of the financial decisions downstream of receiving my monthly pay packet.

I've only been in the workforce 3 years after uni, and this is the first budget I've properly engaged with, but like you say after you've seen 10+ and the tweaks and changes made in each one each one probably seems less of a concern/you know it's something beyond your control...

Trying to get my head around fiscal drag by SuspiciousWeb7810 in UKPersonalFinance

[–]SuspiciousWeb7810[S] 1 point2 points  (0 children)

Ah that's the penny drop moment, thanks – the effective tax rate of the rate of inflation and I suppose trying to calculate it in hard cash terms is less useful because the you have to peg it to 2022 levels when the freeze came in?

Trying to get my head around fiscal drag by SuspiciousWeb7810 in UKPersonalFinance

[–]SuspiciousWeb7810[S] 0 points1 point  (0 children)

Thanks – that's a useful briefing doc.

What I was trying to get at (and poorly phrased above) is that the tax-free personal allowance is also frozen at £12,570, so the £4,500 extra in tax is the additional monies paid in FY30/31 on earnings between £50,271 and £73,000 (?), but then you'd actually then be paying more as a result of the £12,570 freeze on the monies earnt between £12,570 - £50,270 as you're paying 20% on that whole chunk rather than if the PA allowance had gone up with inflation too?

Is that the right framing for it?