Effective income tax rates in the UK (2011-12)

To update my post of March 2010, subject to a few simplifying assumptions, here's an overview of how the main rates of tax on income, output and profits interact.

There are three income tax rates (20%, 40% and 50%); three main rates of Employee's/self-employed National Insurance (8%, 12% and 2%); one main rate of Employer's National Insurance (13.8%); one Tax Credit withdrawal rate (41%); and a mainstream corporation tax rate of 27% (I've ignored small company rate 20% or marginal rate of 28.75%) and VAT (which is either nil or 1/6 of turnover).

Thanks to the Lib-Cons continuing Labour's fine work, the simple average of all those marginal rates is up from 48% last year to 52% next year. Yes chaps, that's more than half the value of your output. There are plenty more marginal income tax rates, a few even higher, some of them lower, but this should help give an overall picture (click to enlarge):Yet again, hands up anybody who thinks it would be more honest, not to say less economically damaging, to have a single, flat rate of income tax?

Obviously, the lower the rate the better, that's a different topic, but the revenue lost (and boost to the economy caused) by reducing the more punitive rates will always be less (and worth more) than the revenue gained (and drag on the economy) caused (and imposed) by increasing the lower rates, so the single flat rate required to replace all those (ignoring LVT for now) would be a lot lower than 52%.