infinity squared a blog about stuff and things

Why Work For A Living?

The income tax brackets for financial year 2006/2007 are as follows:

Tax Free: £5,035
10% tax: between £0 - £2,150
22% tax: between £2,151 - £33,300
40% tax: over £33,300

So, for example if you earn £12,000 a year, the breakdown would be:

£12,000 - £5,035 = £6,965
10% of £2,150 = £215
22% of (£7,185 - £6,965) = £4815 = £1,059.30

Total tax = £215 + £1,059.30 = £1,274.30
Earnings after tax = £5,035 + £1,935 + £3755.7 = £10,725.7

Well, thats not so bad right? Well, hold on, I'm not done yet - we have to take off National Insurance! That leaves us with a nice £9,960.54 to take home.

Ok, well take another example. Take another example of say £30,000 pa. The breakdown:

£30,000 - £5,035 = £24,965
£24,965 - £2,150 = £22,815
10% of £2,150 = £215
22% of £22,815 = £5,019.30

Total tax = £215 + £5,019.30 = £5,234.30
Earnings after tax = £5,035 + £1,935 + £19,059.30 = £26,029.3

Again, take away National Insurance and you are left with £22,020.54 to take home. Thats almost £8k in deductions!

I'll not do another example, but suffice to say, that when you break the 40% bracket, it starts coming off in large chunks. For the most part, its only either the low and high ends of the scale that benefit and those in the middle (the vast majority) are coming out of it with a bit of a bad deal...

Now, imagine you have your hard earned cash and you want to buy something. You go into the store and whats this?! You're being taxed another 17.5% in VAT ON TOP of your already taxed earnings!

Then you want to buy some petrol for your car, oh wait, there's a duty on that too. And you pay more 'Road Tax' or 'Veichle Duty'. What about the extra tax slapped on cigarettes? Don't even start with 'Inheritance Tax' ...

How much of every pound we earn is actually ours? I'd probably say approximately 40p (maybe less!) of every pound we earn actually goes towards buying products and things we want/need. The rest is blatant tax, but where does the money go?

Is this just all part of 'Rip-off Britain' or is it really worth working for a living?