And while the coalition government has been in power tax legislation has become even more labyrinthine and opaque.The tax system in Britain is one of the most complex in the world.
And while the coalition government has been in power tax legislation has become even more labyrinthine and opaque.
During a recent discussion of the Public Accounts Committee, senior tax experts and MPs heavily criticised the UK’s tax code, which is now 17,000 pages long, compared to the 11,500 pages it was in 2007. The CBI’s chairman of its tax committee said, ‘We’ve got to 17,000 pages of tax code – surely the only possible solution is to set it on fire!’
This means that the tax code has increased by a third in only seven years, creating complexity and constantly changing tax reliefs, which many claim hampers business growth. For tax advice speak to a specialist firm like Alexander & Co Chartered Accountants.
Not only that but changes to personal taxes have meant that many people have been left confused and have fared badly, during the coalition’s four-and-a-half term of austerity. But who has done best out of it and who worst?
According to data from the Institute for Fiscal Studies (IFS), parents whose wages fell within the top 20 per cent of households in relation to family size (£33,500 for a one child household and £60,100 a year for a two child household) have felt the biggest squeeze on their income since 2010. These households lost anywhere between a paltry £20 and a huge £325 a week, which amounts to between 3pc and 12pc of their income.
However, the coalition’s tax regime has given a boost to the poorest pensioners and average-earning working-age adults without children. The change however is pretty miniscule, adding up to only 1 per cent of total income.
The most far-reaching changes have arguably been the increase to the personal allowance thresholds, which are the amounts people can earn before they begin to pay income tax or fall into a certain income tax band. The Government claims that the changes have allowed 2.7 million low-income individuals to escape income tax altogether since 2010. The allowance was raised by a significant 54pc from £6,475 in 2010-11 to £10,000 at present. There is a planned increase to £10,500, which will have a very marginal effect on tax payments.
This sounds good in theory but the reality isn’t so simple. IFS figures show someone earning £25,000 in 2010 was paying £4,010 but now pays around £3,000. But the TUC has raised concerns: four million workers earn too little to benefit from these changes only one in four women earns less than £10,000 a year. This also doesn’t take into account inflation which has seen real salaries decrease, and low interest rates on savings leading to poor growth.
One of the most unpopular cuts to affect the middle classes was the removal of child benefit in 2013, which impacted about 1.1 million parents earning £50,000 or more. It was deemed unfair because two parents with salaries of £49,000 a year were unaffected, yet a single parent earning £51,000 could not claim. As a result, child benefit reforms made couples with children where only one partner was earning the biggest losers of Coalition tax and benefit reforms, losing about £70 a week or £3,640 a year, much higher than the average household loss of around £18.
Meanwhile, where savers and investors are concerned, this government has both helped and hindered. Pension savers who have massive pension pots were hit in 2012 by a reduction to the lifetime savings limit, from £1.5m to £1.25m. Workers on above-average salaries including some doctors, senior police staff and middle managers will be caught by the new net. There was also a reduction to annual pensions allowance of £10,000 from £50,000 to £40,000 a year. However, the ISA allowance was increased this year from £11,520 to £15,000, allowing people a convenient way to save around 25pc more on a tax-free basis every year.
Have you been affected badly by the changes to the tax regime in recent years as a single parent, a pensioner or a one-income household?