It’s a popular view across the country – those who earn the most money should pay the most tax. It’s the concept popularly known as ‘taxing the rich’.

So let’s work out who qualifies as rich. Is it based on what you earn or what you own? For this debate to be around income tax, we have to concentrate on earnings. Maybe estate taxes is another subject for another day?

When do you qualify as ‘rich’?
Let’s analyse when the taxman thinks you qualify as rich. There are several milestones within the tax system at which the rate of tax applied to your income increases – pretty much in £50,000 chunks.

We’ll take the average UK full-time salary as being £30,000. It’s about that, perhaps depending on where in the country you live. The first ‘we need to tax them more’ trigger point is £50,000 – not even as much as twice the average. Surely someone earning £50,000 a year isn’t rich? But the taxman doubles your tax rate. And to make matters worse, he thinks you are rich enough to start paying back the child benefit that he handed to you when you qualified as ‘poor’.

Penalised tax rate
Now double the threshold to £100,000. Is someone on that salary qualified as rich? The last Labour Chancellor we had certainly thought so. Never mind claiming back child benefit, he took personal allowances off these ‘rich’ people. That threshold has not changed since it was introduced in 2009, dragging more and more people into this penalised tax rate and defining them as ‘rich’ at the same time.

The third level of £150,000 is the one at which you hit the highest rate of tax, so presumably the government does think people earning over that sum can be classified as rich. The number paying that tax rate 12 years ago was under 250,000; it’s now getting on for 3 times that number. More ‘rich’ people to pay the higher taxes we all think they should do?

Some reanalysis, rather than perpetuating an archaic taxation system, and some joined up thinking would go down a bundle.