What caught my eye this week.
One reason you hear more people complaining about high taxes these days is because more people are paying higher-rate taxes.
At the start of the 1990s, just 3.5% of UK adults were in the upper tax band [1]. That wasn’t exactly fun – and there was a recession coming, with a big housing crash imminent. But least those 1.6 million higher-rate payers could console themselves they were members of an earning elite, of sorts.
Loadsamoney? Not any more. We’ve only just begun to slog through a six-year freeze on tax thresholds that is set to send the number of higher-rate taxpayers to 7.8 million by 2028.
If nothing else it should be a boom time for tax accountants.
Check out this graph from the IFS [2]:
[3]Source: IFS
The higher-rate threshold today starts at £50,270. For the same share of the population to be paying higher-rate taxes as were in 1991, the IFS calculates the threshold would need to be nearer to £100,000 in 2028.
As things stand it will be… £50,270.
There’s an argument that a broader tax base is more equitable and sustainable, I suppose. But good luck raising it in the midst of raging inflation, rising mortgage rates, and disquiet over the state of the public services, especially healthcare.
People can see their money doesn’t go as far as it used to with their own spending, and they’re impatient with what they’re getting for their taxes too.
The UK economy is stagnant [4] and ONS figures show productivity growth has slipped to the lowest level [5] in a decade. (At least energy bills are set to fall – a windfall for both our wallets and also the State purse, given the energy price guarantee.)
Thanks to high inflation and the frozen thresholds, some will even find their incomes go nowhere in real terms1 [6] over the next few years – yet they’ll be taxed more heavily on the top slice of what they do earn, because they’ll be dragged into a higher-rate tax bracket.
It could be you
It’s not a pretty picture [7], but we only recently [8] did politics so let’s leave that for another day.
Instead I wonder how closely Monevator readers reflect the national statistics?
My instinct is we’re overweight higher-rate payers. Though I guess perhaps a heavier skew to retirees might bring the number back down?
An anonymous poll! Please select according to the highest official rate of UK income tax you pay:
[9]
So much for where we’re at today. But if you’re currently a basic-rate tax payer, do you think you’ll be dragged into the higher-rate bracket by 2028?
And if you’re already paying higher-rate taxes – perhaps even the marginal rates [10] the crazy system introduces – are you taking evasive action (such as diverting more salary [11] into your SIPP) to curb the damage?
Let us know in the comments below, and have a great weekend!
From Monevator
Investor compensation schemes: are you covered? – Monevator [12]
Too good to be true: on investment opinion, commentary, and third-party analysis – Monevator [13]
From the archive-ator: Holiday strategies to refresh a frugal soul – Monevator [14]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Government introduces sweeping changes with Renters’ Reform Bill – GOV.UK [15]
Two-thirds of Britain’s mortgage rise pain to come – Resolution Foundation [16]
Renters need £617,000 plus state pension for ‘moderate’ retirement – This Is Money [17]
Annual energy bills should soon fall to an average of £2,053 – Sky [18]
Soldiers to be trained to check passports at UK borders – Guardian [19]
George Osborne to lead £2.4bn investment management firm – Guardian [20]
Fallen darling Purplebricks sold to rival estate agent for £1 – BBC [21]
Rishi Sunak cites… cheaper beer and tampons as the Brexit benefits – Guardian [22]
Vice media files for bankruptcy – Hollywood Reporter [23]
[24]
Wait for probate hits at least two months – Which [25]
Products and services
Will you qualify for Nationwide’s £100 member bonus? – Be Clever With Your Cash [26]
Five reasons you’re wrong about switching broadband provider – Which [27]
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor [28]
Should you spend £229 or £2,149 on a washing machine? – This Is Money [29]
Lloyds’ new £150 current account switching offer comes with a perk – Which [30]
Open an account with low-cost platform InvestEngine via our link [31] and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [31]
How to fly economy class but feel like you’re in business – Guardian [32]
Homes for sale close to the sea, in pictures – Guardian [33]
Stealth wealth mini-special
There’s no secret to how wealthy people dress – The Atlantic via MSN [34]
The quiet luxury of language – Dror Poleg [35]
Comment and opinion
[36]
Why has the equal weighted S&P 500 index beaten the market cap weighted? – Morningstar [37]
The spectrum of financial (in)dependence – Morgan Housel [38]
Was a ‘price-price spiral’ behind the inflation shock? – Stay At Home Macro [39]
Era of “massive” UK house prices near end, says OBR economist – Guardian [40]
Can we ever really have enough? – Forbes [41]
The pandemic was an experience in hedging your life – Financial Samurai [42]
Halving inflation isn’t going to transform Tory fortunes – David Smith [43]
The problem with investing in bond indexes [Podcast] – Peter Lazaroff [44]
An overview of factor investing and its pros and cons – Humble Dollar [45]
Active outperformance: luck or skill? [Spoiler alert…] – T.E.B.I. [46]
Protecting seniors – Humble Dollar [47]
Naughty corner: Active antics
Six ways that UK equities look like a bargain – Schroders [48]
Investing in wind farms, motorways and phone masts [Search result] – FT [49]
Finding quality stocks using profitability ratios – UK Dividend Stocks [50]
Concentrating on the best – Verdad [51]
Something’s gotta give: investing ahead of deglobalisation – Sapient Capital [52]
US small caps look cheap versus large caps – Janus Henderson [53]
Look beyond expensive US stocks, says GMO – Institutional Investor [54]
The coming Greek ‘megacycle’ [Search result] – FT [55]
The Winner’s Game – Investment Talk [56]
Kindle book bargains
The Moneyless Man: A Year of Freeconomic Living by Mark Boyle – £0.99 on Kindle [57]
200 Years of Muddling Through: The British Economy by Duncan Weldon – £0.99 on Kindle [58]
A Journey Through Labour’s Lost England by Sebastian Payne – £0.99 on Kindle [59]
Too Big To Jail: The Greatest Banking Scandal of the Century by Chris Blackhurst – £0.99 on Kindle [60]
Environmental factors
Where to find the energy to save the world – Wired [61]
UN: world likely to see hottest year on record in next five years… – Axios [62]
…at least saving the Ozone Layer stopped it being even worse – Hakai [63]
Could restaurants solve the world’s jellyfish problem? – BBC [64]
The first really awesome biodiversity-meets-investing resource – K.O.I. [65]
Octopus and L&G make £70m in UK heat pump manufacturer – This Is Money [66]
Crypto o’ crypto
A retrospective on the crypto runs of 2022 – Chicago Fed [67]
One million individual wallets now hold a whole Bitcoin – CoinDesk [68]
Robot overlord roundup
The coming AI battles at the international level – Stratechery [69]
What ChatGPT means for investment professionals – CFA Institute [70]
Searching for investment answers – Humble Dollar [71]
Example of someone already taking the guardrails off an AI model – Eric Hartford [72]
ChatGPT can’t do much for everyday investors yet… – Savant Wealth [73]
…but could enable radical visual strategies in the future – Institutional Investor [74]
Off our beat
How England’s seaside towns became both a trap and a refuge – Prospect [75]
Choose the activism that won’t make you miserable – The Atlantic via MSN [76]
How Formula 1 became the world’s fastest growing sport – Huddle Up [77]
He told followers to starve to meet Jesus. Why did they? – N.Y.T. via Yahoo [78]
The ‘return to the office’ won’t save the office – Vox [79]
And finally…
“He who has learned to disagree without being disagreeable has discovered the most valuable secret of negotiation.”
– Chris Voss, Never Split the Difference [80]
Like these links? Subscribe [81] to get them every Friday. Note this article includes affiliate links, such as from Amazon [82] and Interactive Investor [28].
- That is, inflation-adjusted. [↩ [87]]