Saturday, August 9, 2008

No more savings any more

UK savings have virtually evaporated. Too much consumption, too much debt and far too much reliance on housing equity.

Stealth tax

With each passing year, more people are falling into the higher tax band. Currently, almost 4 million tax payers are regarded as high income earners. That is about one taxpayer in eight.

Back in 1990, a little over one million tax payers found themselves paying the higher 40 percent tax rate. Every year since then, the threshold has trapped progressively more taxpayers. Currently, the threshold is set at just £36,000 after personal allowances. It is comfortable wage, but hardly a fortune.

The 40 percent band captured these additional taxpayers during a period of high growth. Today, the economy is slowing, and the treasury will be looking for new sources of revenues. With a little higher inflation, limited increases of the 40 percent threshold provides an ideal way of filling up those tax shortfalls.

Just wait, it will not be long before a majority of taxpayers will be labeled as "high earners".