Between income tax, National Insurance (second income tax), and personal allowance phaseout the rates are nothing like what they seem at first (20%, 40%, 45% - yeah right).
Here are the rates I calculated:
- £0-£7955 - 0%
- £7955-£10,000 - 12%
- £10,000-£41,860 - 32%
- £41,860-£41,865 - 22% (yes, it's a £5 wide tax band)
- £41,865-£100,000 - 42%
- £100,000-£120,000 - 62%
- £120,000-£150,000 - 42%
- £150,000+ - 47%
- high income taxes (especially that 62% rate) generate serious disincentive to work
- taxing annual income means self-employed people whose income changes from year to year end up paying a lot more than people with stable income
- taxing income instead of wealth means rich people can technically have low "incomes" and pay very little, while people with just salary and no wealth whatsoever and paying a ton
- tax bands make no adjustment for cost of living depending on region - so a person living in London will end up in higher tax band at standards of living much lower than a person living in the middle of nowhere - resulting in another way how London subsidises the rest of UK
- bankers making millions are probably all paying much lower rates than the middle class since they can hire some tax avoidance lawyers and there are convenient tax shelters located just next to the UK.
And a bonus question for behavioural economics exam: Would marginal income tax rates be more or less disincentivizing if people have no idea how much tax they're paying because taxes are so damn complicated?