{"id":11418,"date":"2026-04-23T18:51:28","date_gmt":"2026-04-23T17:51:28","guid":{"rendered":"https:\/\/sbwm.uk\/?p=11418"},"modified":"2026-04-23T18:51:29","modified_gmt":"2026-04-23T17:51:29","slug":"weighing-up-the-incentives-and-disincentives-of-your-tax-bill","status":"publish","type":"post","link":"https:\/\/sbwm.uk\/v3\/newsletter\/weighing-up-the-incentives-and-disincentives-of-your-tax-bill\/","title":{"rendered":"Weighing up the incentives and disincentives of your tax bill"},"content":{"rendered":"<!-- wp:themify-builder\/canvas \/-->\n\n<p><b>Just how much is tax disincentivising you? The latest Economic and Fiscal Outlook from the Office for Budget Responsibility (OBR) had some disconcerting words to share.<\/b><\/p>\n<p>Published alongside the Chancellor\u2019s Spring Forecast in early March, the OBR provided a sober projection of gross domestic product (GDP):<\/p>\n<blockquote>\n<p><i>\u201cThe tax-to-GDP ratio is forecast to increase to a post-war high of 38.5 per cent of GDP in 2030\/31. And many marginal tax rates \u2013 of relevance to incentives to work, save and invest \u2013 are much higher. A higher level of the tax take increases the risk that incentives within the tax system constrain economic activity by more than expected.\u201d<\/i><\/p>\n<\/blockquote>\n<p>As is often the case with the OBR\u2019s words of wisdom, they need some translation:<\/p>\n<ul>\n<li><b>The tax-to-GDP ratio<\/b> is a measure of the tax burden on the UK economy. In effect, the government will be taking 38.5p of every \u00a31 the economy generates in four years\u2019 time \u2013 the highest rate in modern times.<\/li>\n<li><b>Marginal tax rate<\/b> is the effective rate of tax you pay on the extra \u00a31 of income or capital. This can be much higher than the \u2018normal\u2019 tax rates and, in extreme situations, can be over 100%.<span class=\"Apple-converted-space\">\u00a0<\/span><\/li>\n<li><b>Incentives within the tax system distort or constrain economic activity by more than expected.<\/b> If you face a high marginal rate of tax, for example, on additional earnings, then you might feel inclined not to accept the promotion that will give you that extra income or choose to work fewer hours at the higher pay rate.<span class=\"Apple-converted-space\">\u00a0<\/span><\/li>\n<\/ul>\n<p>A good example of what the OBR is concerned about can be found at the \u00a3100,000 income level. Crossing that threshold means:<\/p>\n<ul>\n<li>A gradual loss of the personal allowance, equating to a marginal tax rate on earnings of 60% (67.5% in Scotland) up to \u00a3125,140 of total income. Add in national insurance (2%) and, for many graduates, student loan repayments (9%), and out of every marginal \u00a31 over \u00a3100,000 there could be only 29p (21.5p in Scotland) left to spend.<\/li>\n<li>Entitlement to tax-free childcare, worth up to \u00a32,000 per child is lost. So too is entitlement (other than in Scotland) worth up to 30 hours of free childcare.<\/li>\n<\/ul>\n<p>The OBR plans to \u201cconduct further analysis of UK marginal tax rates\u201d this year, but given revenue pressures, the chances of reform look slim. Better look to your own tax planning.\u00a0<\/p>\n<p><b><i>Tax treatment varies according to individual circumstances and is subject to change.<\/i><\/b><\/p>\n<p><b><i>The Financial Conduct Authority does not regulate tax advice. <span class=\"Apple-converted-space\">\u00a0<\/span><\/i><\/b><\/p>","protected":false},"excerpt":{"rendered":"<p>Just how much is tax disincentivising you? The latest Economic and Fiscal Outlook from the Office for Budget Responsibility (OBR) had some disconcerting words to share. Published alongside the Chancellor\u2019s Spring Forecast in early March, the OBR provided a sober projection of gross domestic product (GDP): \u201cThe tax-to-GDP ratio is forecast to increase to a [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":11419,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"wds_primary_category":33,"footnotes":""},"categories":[33],"tags":[],"class_list":["post-11418","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-newsletter","has-post-title","has-post-date","has-post-category","has-post-tag","has-post-comment","has-post-author",""],"builder_content":"","_links":{"self":[{"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/posts\/11418","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/comments?post=11418"}],"version-history":[{"count":0,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/posts\/11418\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/media\/11419"}],"wp:attachment":[{"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/media?parent=11418"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/categories?post=11418"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/sbwm.uk\/v3\/wp-json\/wp\/v2\/tags?post=11418"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}