Liam Field: We’ve built a system that punishes the ambition that we claim to reward.
We're watching the same failure loop.
Liam Field is a writer and Conservative Party member with an MSc in Philosophy and Public Policy from the LSE.
The Conservative Party claims to champion hard work and ambition. Britain’s tax system punishes both.
After 14 years of government we shoulder much of the blame for this contradiction, but fixing it is how we win back the strivers who should be our natural supporters. Here are three examples of the system failing strivers at every income level, and three reforms that could fix it.
First, a single earner family, the kind making headlines for turning down promotions because of tax traps. An NHS manager earning £65,000 a year while their partner cares for their three children full-time. Their employer, recognizing their excellent work, offers a promotion with a £5,000 pay rise.
After 40 per cent income tax, 2 per cent National Insurance, and the High Income Child Benefit Charge (HICBC) taking 25 per cent of their Child Benefit, they keep £2,126 of that £5,000. For a family supporting three children, that’s barely £40 a week. We’ve built a system that punishes the ambition that we claim to reward.
Next, a single parent of two children doing skilled part-time work for £18,000 a year, while receiving Universal Credit. Her employer needs more of her time, and offers her additional hours worth £5,000.
After 20 per cent income tax and 12 per cent National Insurance, she has £3,400 net. Universal Credit withdraws 55 per cent of that: £1,870. She keeps £1,530 of the £5,000 raise: £127 a month for six extra hours every week. That’s an effective hourly rate of £5.30, less than half the minimum wage. The Universal Credit taper turns skilled work into poverty wages.
Finally, what Britain calls a high earner: a professional on £99,000 with three children. After a successful appraisal, her employer awards her a £5,000 bonus.
Above £100,000, you lose £1 of personal allowance for every £2 earned, creating an effective 60 per cent tax rate. You also become ineligible for Tax-Free Childcare worth £2,000 per child. After £3,000 in income tax and £100 in National Insurance, she keeps £1,900 of her bonus – but loses £6,000 in childcare support. She’s £4,100 worse off than if she’d never received the bonus. That’s not a typo: a £5,000 reward costs her £4,100.
And that’s just Tax-Free Childcare. Cross £100,000 and you also lose 30 hours of free childcare per week, worth roughly £12,000 a year per child. For three children under five, that’s £36,000 a year. Our professional would need to earn close to £170,000 before she’s better off. Progression becomes financially impossible. This isn’t a marginal rate. It’s a ceiling.
These three examples reveal the system’s priorities. We’ve designed a tax system where progression is punished, where earning more can …
We're watching the same failure loop.
Liam Field is a writer and Conservative Party member with an MSc in Philosophy and Public Policy from the LSE.
The Conservative Party claims to champion hard work and ambition. Britain’s tax system punishes both.
After 14 years of government we shoulder much of the blame for this contradiction, but fixing it is how we win back the strivers who should be our natural supporters. Here are three examples of the system failing strivers at every income level, and three reforms that could fix it.
First, a single earner family, the kind making headlines for turning down promotions because of tax traps. An NHS manager earning £65,000 a year while their partner cares for their three children full-time. Their employer, recognizing their excellent work, offers a promotion with a £5,000 pay rise.
After 40 per cent income tax, 2 per cent National Insurance, and the High Income Child Benefit Charge (HICBC) taking 25 per cent of their Child Benefit, they keep £2,126 of that £5,000. For a family supporting three children, that’s barely £40 a week. We’ve built a system that punishes the ambition that we claim to reward.
Next, a single parent of two children doing skilled part-time work for £18,000 a year, while receiving Universal Credit. Her employer needs more of her time, and offers her additional hours worth £5,000.
After 20 per cent income tax and 12 per cent National Insurance, she has £3,400 net. Universal Credit withdraws 55 per cent of that: £1,870. She keeps £1,530 of the £5,000 raise: £127 a month for six extra hours every week. That’s an effective hourly rate of £5.30, less than half the minimum wage. The Universal Credit taper turns skilled work into poverty wages.
Finally, what Britain calls a high earner: a professional on £99,000 with three children. After a successful appraisal, her employer awards her a £5,000 bonus.
Above £100,000, you lose £1 of personal allowance for every £2 earned, creating an effective 60 per cent tax rate. You also become ineligible for Tax-Free Childcare worth £2,000 per child. After £3,000 in income tax and £100 in National Insurance, she keeps £1,900 of her bonus – but loses £6,000 in childcare support. She’s £4,100 worse off than if she’d never received the bonus. That’s not a typo: a £5,000 reward costs her £4,100.
And that’s just Tax-Free Childcare. Cross £100,000 and you also lose 30 hours of free childcare per week, worth roughly £12,000 a year per child. For three children under five, that’s £36,000 a year. Our professional would need to earn close to £170,000 before she’s better off. Progression becomes financially impossible. This isn’t a marginal rate. It’s a ceiling.
These three examples reveal the system’s priorities. We’ve designed a tax system where progression is punished, where earning more can …
Liam Field: We’ve built a system that punishes the ambition that we claim to reward.
We're watching the same failure loop.
Liam Field is a writer and Conservative Party member with an MSc in Philosophy and Public Policy from the LSE.
The Conservative Party claims to champion hard work and ambition. Britain’s tax system punishes both.
After 14 years of government we shoulder much of the blame for this contradiction, but fixing it is how we win back the strivers who should be our natural supporters. Here are three examples of the system failing strivers at every income level, and three reforms that could fix it.
First, a single earner family, the kind making headlines for turning down promotions because of tax traps. An NHS manager earning £65,000 a year while their partner cares for their three children full-time. Their employer, recognizing their excellent work, offers a promotion with a £5,000 pay rise.
After 40 per cent income tax, 2 per cent National Insurance, and the High Income Child Benefit Charge (HICBC) taking 25 per cent of their Child Benefit, they keep £2,126 of that £5,000. For a family supporting three children, that’s barely £40 a week. We’ve built a system that punishes the ambition that we claim to reward.
Next, a single parent of two children doing skilled part-time work for £18,000 a year, while receiving Universal Credit. Her employer needs more of her time, and offers her additional hours worth £5,000.
After 20 per cent income tax and 12 per cent National Insurance, she has £3,400 net. Universal Credit withdraws 55 per cent of that: £1,870. She keeps £1,530 of the £5,000 raise: £127 a month for six extra hours every week. That’s an effective hourly rate of £5.30, less than half the minimum wage. The Universal Credit taper turns skilled work into poverty wages.
Finally, what Britain calls a high earner: a professional on £99,000 with three children. After a successful appraisal, her employer awards her a £5,000 bonus.
Above £100,000, you lose £1 of personal allowance for every £2 earned, creating an effective 60 per cent tax rate. You also become ineligible for Tax-Free Childcare worth £2,000 per child. After £3,000 in income tax and £100 in National Insurance, she keeps £1,900 of her bonus – but loses £6,000 in childcare support. She’s £4,100 worse off than if she’d never received the bonus. That’s not a typo: a £5,000 reward costs her £4,100.
And that’s just Tax-Free Childcare. Cross £100,000 and you also lose 30 hours of free childcare per week, worth roughly £12,000 a year per child. For three children under five, that’s £36,000 a year. Our professional would need to earn close to £170,000 before she’s better off. Progression becomes financially impossible. This isn’t a marginal rate. It’s a ceiling.
These three examples reveal the system’s priorities. We’ve designed a tax system where progression is punished, where earning more can …
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