If you'd have told the NUS that the "graduate tax" introduced would be a flat rate for all students (which actually works out as a regressive tax given that wealthier graduates can pay it back faster and avoid some interest) then I'd bet they would have rightly told you to shove it.

It's 9% on earnings above a certain figure. Are you suggesting that the rate should increase for higher income levels thereby adding another level of complexity?

It's 9% on earnings above a certain figure. Are you suggesting that the rate should increase for higher income levels thereby adding another level of complexity?

On the same logic we'd have a flat income tax rate because anything else would be "too complicated".

On the same logic we'd have a flat income tax rate because anything else would be "too complicated".

Not at all. Besides, if you had different rates, how high would you make the highest rate? There's not a lot of point in having different rates unless the gap was quite large. So, having, say, rates of 9% and 12% would be pointless. However, having rates of, say, 9% and 20% would leave some people with a marginal rate of 66% (including NI).

Not at all.

You didn't actually say why here.

Do you want me to say why I oppose a single rate of income tax? I would have though that was obvious.

You didn't say why the same logic didn't apply for the single rate of repayment.

Yes I did. I don't think it is practical to have a second layer of differential tax rates. The total marginal rate at the top end would be higher than it has been for 35 years.

Yes I did. I don't think it is practical to have a second layer of differential tax rates. The total marginal rate at the top end would be higher than it has been for 35 years.

How many who pay the top rate of income tax would be paying a graduate tax? (if that's what you're suggesting, genuinely not sure)

How many who pay the top rate of income tax would be paying a graduate tax? (if that's what you're suggesting, genuinely not sure)

I'm sure many people would still be paying off their tuition fees when they first hit that rate although they might not be for very long. However, even those on the higher (40%) rate would be paying a very high marginal rate unless the differences between graduate tax rates were small. As I said in the first place, there doesn't seem much point in having differential rates unless the differences were fairly large.

We did have multiple differential tax rates as things like dividends, savings, capital gains and others are paid on a different scale to income tax. Or at least they were when I was studying tax at Uni so admittedly the coalition may have simplified things since I stopped studying tax in 2011

We did have multiple differential tax rates as things like dividends, savings, capital gains and others are paid on a different scale to income tax. Or at least they were when I was studying tax at Uni so admittedly the coalition may have simplified things since I stopped studying tax in 2011

But that's applying different rates to different types of income. Some people are proposing two different sets of tax rates applying to the same income.

The rates applied are based on your income though. It's not just on Dividend income that the graduated rate is based on, but your total income for the year including salaries, drawings, savings interest, dividends et al.

 

So effectively, all these taxes are based upon the same income.

 

A better example would be National Insurance. Both Income Tax and National Insurance are based on your income and taken by PAYE when you get paid (obviously, as most of us already know.) However the rates at which both are incurred and then charged are different. The NI band is based on a % of your income between £195 and £805 (I think this is the current banding) and then a % above £805. That's not counting NI Credits/Savings from Pension Contributions etc.

 

So HMRC are currently set up to efficiently and effectively enforce multiple taxes on the same stream of income. A graduate tax would be very very easy for HMRC to bring into effect. Flat rate or graduated. Thanks to PAYE all that would be required was sufficient notice to allow companies to update their HR and Payroll systems. Most of this is process is already highly automated. I think this would be easier to introduce than the change to Real Time Information for PAYE last year.

The complexity is manageable although governments have regularly expressed a desire to simplify the system. However, body has yet given an idea of what rates they would propose. Maybe that is because nobody wants to admit that they are proposing a punitively high rate on a significant number of people.