Weekend reading: Higher calling

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. 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:

Source: IFS

The higher-rate threshold today starts at £50,570. 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… £50,570.

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 and ONS figures show productivity growth has slipped to the lowest level 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 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, but we only recently 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:

Which tax bracket are you in?

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 the crazy system introduces – are you taking evasive action (such as diverting more salary 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

Too good to be true: on investment opinion, commentary, and third-party analysis – Monevator

From the archive-ator: Holiday strategies to refresh a frugal soul – Monevator


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

Two-thirds of Britain’s mortgage rise pain to come – Resolution Foundation

Renters need £617,000 plus state pension for ‘moderate’ retirement – This Is Money

Annual energy bills should soon fall to an average of £2,053 – Sky

Soldiers to be trained to check passports at UK borders – Guardian

George Osborne to lead £2.4bn investment management firm – Guardian

Fallen darling Purplebricks sold to rival estate agent for £1 – BBC

Rishi Sunak cites… cheaper beer and tampons as the Brexit benefits – Guardian

Vice media files for bankruptcy – Hollywood Reporter

Wait for probate hits at least two months – Which

Products and services

Will you qualify for Nationwide’s £100 member bonus? – Be Clever With Your Cash

Five reasons you’re wrong about switching broadband provider – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Should you spend £229 or £2,149 on a washing machine? – This Is Money

Lloyds’ new £150 current account switching offer comes with a perk – Which

Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine

How to fly economy class but feel like you’re in business – Guardian

Homes for sale close to the sea, in pictures – Guardian

Stealth wealth mini-special

There’s no secret to how wealthy people dress – The Atlantic via MSN

The quiet luxury of language – Dror Poleg

Comment and opinion

Why has the equal weighted S&P 500 index beaten the market cap weighted? – Morningstar

The spectrum of financial (in)dependence – Morgan Housel

Was a ‘price-price spiral’ behind the inflation shock? – Stay At Home Macro

Era of “massive” UK house prices near end, says OBR economist – Guardian

Can we ever really have enough? – Forbes

The pandemic was an experience in hedging your life – Financial Samurai

Halving inflation isn’t going to transform Tory fortunes – David Smith

The problem with investing in bond indexes [Podcast]Peter Lazaroff

An overview of factor investing and its pros and cons – Humble Dollar

Active outperformance: luck or skill? [Spoiler alert…]T.E.B.I.

Protecting seniors – Humble Dollar

Naughty corner: Active antics

Six ways that UK equities look like a bargain – Schroders

Investing in wind farms, motorways and phone masts [Search result]FT

Finding quality stocks using profitability ratios – UK Dividend Stocks

Concentrating on the best – Verdad

Something’s gotta give: investing ahead of deglobalisation – Sapient Capital

US small caps look cheap versus large caps – Janus Henderson

Look beyond expensive US stocks, says GMO – Institutional Investor

The coming Greek ‘megacycle’ [Search result]FT

The Winner’s Game – Investment Talk

Kindle book bargains

The Moneyless Man: A Year of Freeconomic Living by Mark Boyle – £0.99 on Kindle

200 Years of Muddling Through: The British Economy by Duncan Weldon – £0.99 on Kindle

A Journey Through Labour’s Lost England by Sebastian Payne – £0.99 on Kindle

Too Big To Jail: The Greatest Banking Scandal of the Century by Chris Blackhurst – £0.99 on Kindle

Environmental factors

Where to find the energy to save the world – Wired

UN: world likely to see hottest year on record in next five years… – Axios

…at least saving the Ozone Layer stopped it being even worse – Hakai

Could restaurants solve the world’s jellyfish problem? – BBC

The first really awesome biodiversity-meets-investing resource – K.O.I.

Octopus and L&G make £70m in UK heat pump manufacturer – This Is Money

Crypto o’ crypto

A retrospective on the crypto runs of 2022 – Chicago Fed

One million individual wallets now hold a whole Bitcoin – CoinDesk

Robot overlord roundup

The coming AI battles at the international level – Stratechery

What ChatGPT means for investment professionals – CFA Institute

Searching for investment answers – Humble Dollar

Example of someone already taking the guardrails off an AI model – Eric Hartford

ChatGPT can’t do much for everyday investors yet… – Savant Wealth

…but could enable radical visual strategies in the future – Institutional Investor

Off our beat

How England’s seaside towns became both a trap and a refuge – Prospect

Choose the activism that won’t make you miserable – The Atlantic via MSN

How Formula 1 became the world’s fastest growing sport – Huddle Up

He told followers to starve to meet Jesus. Why did they? – N.Y.T. via Yahoo

The ‘return to the office’ won’t save the office – Vox

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

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That is, inflation-adjusted.

The post Weekend reading: Higher calling appeared first on Monevator.

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. That wasn’t exactly fun – and there was a recession coming, with
The post Weekend reading: Higher calling appeared first on Monevator.

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