Letter: Tax too complex

Neither your reporter David Maddox nor Mr Johnstone-Watt (Letters, 24 March) is technically accurate when calculating total tax rates. For normal employees income tax is 20p rising to 40p on reaching the upper threshold.

National Insurance (NI) cuts in at a lower point of 7,225 and is 12 per cent until 42,475 when it becomes 2 per cent and employers have to pay Employer's NI of 13.8 per cent (in 2011-2012 up 1 per cent) below and above the upper threshold.

Since this is really part of an employee's wage package the real employee taxation rates are nearly 46 per cent for basic rate taxpayers and nearly 56 per cent for higher rate taxpayers. It is clear that ordinary workers are losing nearly half their income in tax and higher rate taxpayers have the major disincentive of receiving less than half of what they earn.

The idea that NI was reserved for state pension and the NHS has, like the idea that vehicle excise duty pays for the roads, disappeared into myth. These funds end up back in the Treasury.

Should an employee decide to use their remaining 54p of the 1 they earned to buy petrol they get approximately 0.4 litres, which, with duty and VAT on fuel running at around 62 per cent of the price, has an actual value of 20.5p, meaning total taxation is around 80 per cent.

Both the lower and upper thresholds for income tax and NI are different, which causes confusion and adds to bureaucracy. It is time we simplified our personal tax system.

Bruce D Skivington

Strath

Gairloch, Wester Ross