The UK’s Broken Tax System and How to Fix It

Politicians need to take note of this

Photo by Kelly Sikkema on Unsplash

The top 10% of earners in the UK contribute more than 60% of all of the income tax for the country.

“Tax the rich” I hear you scream.

To be in that 10% upper echelon of UK earners, you don’t have to be rich — you just have to earn £65,000 per year or more… That’s not a lot.

When you mention the top 10%, you think all those people have yachts & indoor pools, but the likelihood is, that most drive a second-hand Mercedes.

How Much Tax Will You Pay On Your Salary?

• If you earn under £12,570, you’ll pay 0% in tax.
• If you earn over £12,570, you’ll pay 20% in tax.
• If you earn over £37,700 you’ll pay 40% in tax.
• If you earn over £125,140, you’ll pay 45% tax.

That structure creates a very obvious problem.

Tax Avoidance & Loopholes Are Incentivised

The late, great investor, Charlie Munger once said:

“Show me the incentive and I will show you the outcome.”

The problem with penalising higher earners is that it penalises hard work…