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[MSE Lawrence]

Poll Started 21 April 2008:

Income Tax: Do you agree with the Govt’s changes?

There’s a possible backbench rebellion against the govt’s 6 April tax changes. The basic rate’s been cut from 22% to 20%; but the old 10% starting band has been dropped to pay for it.


The main winners: Those earning above £15,075 pay less tax.
The main losers: Those earning between £5,435 and £15,075 pay more tax. Some people will have this made up by tax credits but its estimated 5.3m won't.


Calculate your tax gain or loss.

Which of these is closest to your view…

A. I approve. All basic rate taxpayers now pay the same lower 20% rate, and it's lower, so it's good. 17% (1825 votes)

B. I disapprove. It’s not fair that those on lower incomes must now pay more. 83% (8670 votes)


This vote has now closed, but you can still click 'post reply' to discuss below.

[kavomix]

The lower paid are dramatically affected by the loss of the 10% tax bracket. However the media picked up on this fact too late.

Also I would like to argue the figure of £15,075 quoted by Martin. The figure for the people that are affected is higher than that. Admittedly people earning over £15k will see an increase in their pay cheque of a few pence, this is not because the new tax system works to your advantage. It’s because the personal allowance for both NI and Tax have increased. This means you don’t start paying till you earn more. The increase on tax has gone from £5225 to £5435.

However, what people fail to realise is that this increase would have still happened under the old tax system. So to compare the old and the new correctly, (to work out who is quids in, and who is left out to dry) you need to run an example of how much tax you would be paying this tax year if the whole tax system was left the same and the normal increases to the personal allowance and 10% bracket had taken place.

Below are some worked examples.


2007-08 tax year (PA = 5225, 10% = 2230, BR = 22%)
£10,000 - Tax = £782.90, Pay =£9,217.10
£12,000 – Tax = £1,222.90, Pay = £10,777.10
£15,000 – Tax = £1,882.90, Pay = £13,117.10
£19,000 – Tax = £2,762.90, Pay = £16,237.10
£20,000 – Tax = £2,982.90, Pay = £17,017.10
£40,000 – Tax = £7,382.90, Pay = £32,617.10

2008-09 tax year (PA 5435, 10% = 0, BR = 20%)
£10,000 - Tax = £913.00, Pay = £9,087.00
£12,000 – Tax = £1,313.00, Pay = £10,687.00
£15,000 – Tax = £1,913.00, Pay = £13,087.00
£19,000 - Tax = £2,713, Pay = £16,287.00
£20,000 – Tax = £2,913.00, Pay = £17,087
£40,000 – Tax = £6,913.00, Pay = £33,087.00

2008-09 tax year if using old tax system (PA 5435, 10% = 2320, BR = 22%)
£10,000 - Tax = £725.90, Pay = £9,274.10
£12,000 – Tax = £1,165.90, Pay = £10,834.10
£15,000 – Tax = £1,825.90, Pay = £13,174.10
£19,000 - Tax = £2,705.90, Pay = £16,294.10
£20,000 – Tax = £2,925.90, Pay = £17,074.10
£40,000 – Tax = £7,325.90, Pay = £32,674.10

Look through the above (I know its hard because its posted in a forum on the web and not laid out nicely) and you will notice that people earning £19,000 are officially earning less than they would have if the old tax system had carried through to this tax year.

This comparison is needed to show the true extent of the effect of the removal of the 10% bracket. Removing the 10% bracket does now make it easier for you to work out if you’ve over/under paid tax, and a simpler tax system is good. However the lower paid are hit quite badly. If our country was still in a boom and our country finances were well managed, then the government could have implemented an increase in the personal allowance to make up for the loss of tax for the lower earners. Also the system can’t and won’t change just over night. HMRC would have to prepare their computers to work out the whole new tax system, software not just for HMRC but also employers would have to be updated again etc etc
So if any back down was to happen, it would not take affect until next tax year as now is too late. This all should have been raised when Gordon Brown stated it in his last ever Budget.


(Please note i have run these figures quickly so there may be minor mistakes)

[MSE Martin]

Hi Kavomix

Thanks for the very interesting post. I was aware of these discrepancies when I wrote the poll - though hadn't crunched them in the way you had.

I decided to keep the poll simple; so i couldn't be accused of gerrymandering it - one could also argue that some have lost out due to inflation but again I thought I would keep the poll simple and link the explanation of the changes

Martin

[piloti]

There was a time when there were only three classes of people : Upper Middle and workling class.
This Gov' [Labour] has created an extra class beneath Working : Dependency Class, ie those who earn nothing / little, therefore contgribute nothing / little but use a disproportionate amount of services, from Social to Health to Education.
Tax Credits [awful new labour vulgarisation] should be earned, not simply given. Earned by doing social work [ie, work for the community] including looking after old people, street cleaning, park cleaning / gardening etc......
Or would that be considered to be impinging on others human right to scrounge.......

P.

[johncolescarr]

Originally Posted by piloti

There was a time when there were only three classes of people : Upper Middle and workling class.
This Gov' [Labour] has created an extra class beneath Working : Dependency Class, ie those who earn nothing / little, therefore contgribute nothing / little but use a disproportionate amount of services, from Social to Health to Education.
Tax Credits [awful new labour vulgarisation] should be earned, not simply given. Earned by doing social work [ie, work for the community] including looking after old people, street cleaning, park cleaning / gardening etc......
Or would that be considered to be impinging on others human right to scrounge.......

P.

I fundamentally disagree with your comments. I think the move to increase the tax on the poorest members of society is disgraceful. Remember, income tax can only be paid on money that is earned, by definition. The people to loose out the most will not be the 'scroungers' as you call them but those working on a miniscule salary and will be struggling the most to get by. Many of the people affected by the new tax banding will be the street cleaners, social care workers, park cleaners and gardeners that you refer to. The tax credit system allows parents to go out to work and contribute to society, where if these didnt exist the claiming benefits would give a greater income - how ridiculous is that!

As a developed country we should be pround that we can give basic necessities to the vast majority of the people that live in Britain, what would be the alternative, the depravity that we see in the developing countries?

[cowbutt]

I'm in favour of progressive inflation for the simple reason that small amounts of money are far more important to people on lower incomes than those on upper incomes. I also think that the tax system is over-complex, and suspect that usually any revenue losses will cancelled out by savings in collection and administration of the system.

I reserved judgement on the abolition of the 10% rate last year because the personal allowance figures for 2008-2009 weren't announced at the same time. If personal allowances had been significantly increased to around £10-15K, then I'd have had little problem with the move as my calculations indicated it'd be neutral for anyone with an income under the national average of £22K. Furthermore, it would have simplified the tax system a little.

Unfortunately, the personal allowance was simply indexed according to inflation figures.

[seh567]

As one who is affected it is a disgrace! I am a female pensioner and apart from a reduced government pension of £54 per week I have a small company pension paying £350.00 per month. I've just worked out that after my tax allowance I will be paying double the amount of tax (£29 from £14) for the year 2008/2009 due to the fact I am now paying 20% instead of 10%. I am unable to supplement my pensions with pension credit as I have savings over the allowance threshhold, which I scrimped and scraped to save whilst working to have a better quality of retirement. Seems I have been penalised for being thrifty in the past.

[garyrjb]

No-one is better off. we are all being well and truly ripped off. I earn a good wage on paper but am worse off than I have ever been. Petrol costs are extortionate £3500 a year just to get to work!! Rising prices means more VAT for the tax man. Annual payments on mortgage 12k I dont live in palace I just live in the South east. We are talking about people being £130 worse off as opposed to some one like me being £260 better off. We are all worse off!!!
I heard someone say he is doing a weekly commute from Berlin because it works out better for him. This is madness what did I miss!!

rant over.

[bagby]

I dont really understand the tax system but in my own simplistic way, if a person is on a low income then how can it be right that they are penalised in this way by paying more tax and people on higher incomes are better off through this tax system. I would gladly agree to paying a higher rate in tax as this would not mean too much out of my smallish wages but the higher earners would, quite rightly, pay more into the system.

[cruachan]

I favour simplifying our minefield of a taxation system. Respecting those on low incomes for whom 10% was an important concession, I suggest that a similar level of benefit could have been achieved by increasing personal allowances.That would cut clerical work, reduce confusion, and still give the best deal to people on low incomes.

[ceridwen]

I voted that I disapprove of the changes. I am glad taxrate of 22% has been amended to 20% - but it should not have been at the expense of removing the 10% tax rate.

I have a "vested interest" in this one - as I fall in the low salary bracket whereby I am going to lose out because of this. I know I wont see very much difference at all in my takehome pay - but that is only because this has happened at the same time as the raising of the Personal Tax Allowance for the year (which, incidentally, has not been raised enough to allow for inflation - so there has in effect been a real cut in how much we are allowed to earn before tax starts being payable on it).


Incidentally - it would be interesting if anyone could work out what the Basic Personal Allowance would be now if it had kept pace with inflation. There must be someone more maths-minded than myself who can find an online calculator showing what an amount of money in year x needed to be in year y to be the same in real terms (after allowing for inflation).

Thanks M.S.E. Martin for running this poll and giving people the links to work out their own position properly as to how they are affected.
It is all well and good for the Government to state one can get the lost money back in other ways - but that is not the case if your salary is the only income you get and you dont have children. I'm not eligible for Working Tax Credit or anything - because, though my income, is too low its not low enough to qualify for anything. Childless poorly-paid people copping it again in fact - but we must spend money on the priorities of course - like letting the rich off the hook taxwise and, of course, covering the billions of £s for these endless conflicts (oil wars in Iraq, etc). (Just hasten to add for those not used to the British cynical sense of humour - I am very much against these oil wars.)

[woodview]

I am all for dropping to 2 bands of tax, however GB should have increased the tax free allowance when he dropped the 10% band to keep the tax revenue the same.
Why has the media only picked this up now? It was announced last year!

[aubergine]

I find it quite shocking that the labour party should be making lower paid worse off to the benefit of the better off. It is wrong wrong wrong.

A couple of hundred pounds is a hell of a lot for someone on a low income and could be the difference between keeping your head above water or falling into debt.

I'm all for simplification, but not at the expense of the worse off.

I would like to see the higher tax bracket threshhold raised significantly as the 'average wage' is creeping ever closer to it, and the percentage paid by really high earners increased to say 50%.

[podiluska]

Originally Posted by garyrjb

Petrol costs are extortionate £3500 a year just to get to work!!

£3500 in petrol. So about £300 per month. That's 60 gallons - so if you had a reasonably economical car, say 40mpg, you're could be driving 2400 miles a month - or 120 miles a day - 60 miles each way. Have you considered moving or changing your car?

[deptfreemoneytart]

I disapprove because I'm one of the unlucky people paying more tax, but what I really hate is the fact that when Gordon Brown announced this some 12/18 months ago nobody did anything about it then. This present hype has all been brought up by the media and the opposition party to try and undermine the Labour party because they the media tell us we all want a change of government or someone different to attack, instead of whoever's in power being allowed to get on and run Our Great Britain in the interest of all of it's people.

[JAF]

Our eldest son has done exactly what the Labour party told him he should do and been kicked in the teeth for doing it.

He stayed on at school and took A levels, went to university and graduated with a biology honours degree. He is now working in his degree field and paid less than £15,000 pa so he is far from impressed. He has decided he would have been better off if he had left school at 16 had a couple of kids with different females then he would have been given everything on a plate and he could have sat back and put his feet up for life. Instead he works 40+ hours a week and is now, thanks to Mr Brownand his budget in 2007, even worse off. We paid for him to go through univeristy otherwise his student loans would be accruing 'interest' as his salary does not reach the threshold to start paying back a student loan. His new plan is to emigrate as he said there is no point staying here. His brother is studying chemistry and after finishing his degree has said 'not much point looking for work here is there!'

I was very surprised when this was not picked up in Mr Brown's last budget budget but all the labour MPs were too busy behaving like silly school children in the playground over the announcement of the 2p cut in the basic rate to pay much attention to what was actually being said.

I am not impressed with the carrots dangling on sticks to try and remedy this it would appear all young single people are going to be ignored. I just hope when the next election comes round they remember this!

[cricketer]

Final proof, in black and white.
My wife aged 62 has a small private pension of £477.60 per month along with a reduced State pension.
Net pension last month £435.45. Net this month £420 80
THANKS GORDON!!!!!

[bern]

i wrote to the prime minister after the budget last year complaining about the geting rid of the 10p tax band,i was passed on to the treasury for a reply.the reply i got back was effectively saying tough,that is just your hard luck and there is nothing we can do about it.

they said well some people will gain from it,but that is a fat load of use to me as one of the losers of this.i have to live on a small pension and incapacity benfit that amount to less then £8400 a year,i am disabled and chronically ill,and despite wishing i could work cannot.i have lost all of this years pension increase because of the tax increase,and have on top of that all the other increases in gas,electric and food to name but a few.

every penny counts when you are getting this little,and to be told that someone earning over 30,000 is over £200 better of is to say but the least upsetting.why am i and million of others having money taken of us just to give to someone who earns more in a year then i do in four.

labour are rightly worried about their staying in power,i wouldn't vote for them again for anything.to take money away from the poorest in britain and give it to those that already have far more money is terrible.

i know we all have to suffer the increase in things going up,so it doesn't matter if you are earning little or a lot,people are struggling to just keep thier heads above water.but it is hard living on what me and my wife do,who is my carer.

[mcgazz]

What I don't understand is why almost no one who proposes changing the tax system suggests funding cuts in the income tax rates and/or increases in the personal allowance by increasing the tax on inheritances, "capital gains", share dividends and savings interest to the same level (if not higher) than the tax on wages.

Surely it's better to tax unearned, rather than earned, income?

[JBEILBY]

I am one of those who will be seriously affected. I took early retirement to look after my elderly mother. So am on reduced company pension which will now be taxed more and my mother is also now going to be affected with this change as she receives a small widow's pension from my late father's pension scheme as well as her state pension. Thanks robber Brown for stealing from the pension funds and now taking more money out of our pockets. Presumably this will fund their and the Euro lot's expenses!!! Enjoy your champagne lunches boys as come the revolution guess who will be first up against the wall!!