Tax raising ideas and fairness?

Pennywise

So, we know that everyone's taxes are going to rise in the next few years to pay for the recession. We also know that there is a lot of ill feeling about tax evasion/avoidance, whether it be through legal loopholes, careful planning or deliberate hiding of income. Rather than tinkering around the edges changing a few minor things and messing around with tax rates, the population is braced for rises so it would be a good time to make some fundamental changes. There are two relatively simple changes I'd like to see which would simplify and transform the tax system and which would be fair and beneficial to lower and mid earners.

1. Free transferability of personal tax allowances, i.e. the personal allowance and capital gains tax allowance, and basic rate bands, between spouses (and those in legal partnerships), so that couples can legitimately benefit from their own allowances without having to resort to the subterfuge of transferring assets between themselves so as not to lose out. It is crazy that two people earning £40k each less tax than if one stayed at home and the other earned £80k. This could be achieved by a simple election to be signed by both to agree to the transfer of all or some allowance from one to another. This is simple, easily understandable and easy for the couple to do.

2. Scrap employees NIC and raise the basic rate of income tax to something like 30% instead. Contrary to what people think, NICs aren't ringfenced to pay for the NHS or state pensions - it's just another tax and goes into the same pot. Previously, politicians have been scared of the publicity of the resultant hike in basic rate tax rates, but now may be the time to do it when the public are already braced for change and bad news. Average and low earners wouldn't notice a difference in their pay packets as the combined tax & NIC is around 30% anyway. Massive amounts of money could be raised from people with investments, i.e. income from property, pensions, company dividends, etc that currently avoid paying NIC as NIC is only charged on earned income not investment income. Again, a simplifying measure - little impact on lower income earners but a proportional impact on higher earners - at the moment, lots of people "arrange" their affairs to produce investment income rather than earned income, thus saving themselves NIC.

Both these relatively simple ideas would solve some of the obvious inequalities in the system. Obviously, the numbers would have be crunched to arrive at the revised thresholds, rates, allowances, etc., and clearly the pensioners tax allowances would have to be reviewed likewise.

ukcarper

Pennywise wrote: »

So, we know that everyone's taxes are going to rise in the next few years to pay for the recession. We also know that there is a lot of ill feeling about tax evasion/avoidance, whether it be through legal loopholes, careful planning or deliberate hiding of income. Rather than tinkering around the edges changing a few minor things and messing around with tax rates, the population is braced for rises so it would be a good time to make some fundamental changes. There are two relatively simple changes I'd like to see which would simplify and transform the tax system and which would be fair and beneficial to lower and mid earners.

1. Free transferability of personal tax allowances, i.e. the personal allowance and capital gains tax allowance, and basic rate bands, between spouses (and those in legal partnerships), so that couples can legitimately benefit from their own allowances without having to resort to the subterfuge of transferring assets between themselves so as not to lose out. It is crazy that two people earning £40k each less tax than if one stayed at home and the other earned £80k. This could be achieved by a simple election to be signed by both to agree to the transfer of all or some allowance from one to another. This is simple, easily understandable and easy for the couple to do.

2. Scrap employees NIC and raise the basic rate of income tax to something like 30% instead. Contrary to what people think, NICs aren't ringfenced to pay for the NHS or state pensions - it's just another tax and goes into the same pot. Previously, politicians have been scared of the publicity of the resultant hike in basic rate tax rates, but now may be the time to do it when the public are already braced for change and bad news. Average and low earners wouldn't notice a difference in their pay packets as the combined tax & NIC is around 30% anyway. Massive amounts of money could be raised from people with investments, i.e. income from property, pensions, company dividends, etc that currently avoid paying NIC as NIC is only charged on earned income not investment income. Again, a simplifying measure - little impact on lower income earners but a proportional impact on higher earners - at the moment, lots of people "arrange" their affairs to produce investment income rather than earned income, thus saving themselves NIC.

Both these relatively simple ideas would solve some of the obvious inequalities in the system. Obviously, the numbers would have be crunched to arrive at the revised thresholds, rates, allowances, etc., and clearly the pensioners tax allowances would have to be reviewed likewise.

I can’t see scarping National Insurance and raising income tax to 30% would increase tax revenue I thought combined NIC and I/C tax was more than that now not taking into account employers contributions. I do agree that NI is just a tax and it would be better if it was combined with I/C tax.

StevieJ

Pennywise wrote: »

So

2. Scrap employees NIC and raise the basic rate of income tax to something like 30% instead. .

Nice one, you have just increased the tax of the high living :beer: pensioners and blue rinse brigade by 10%

Pennywise

StevieJ wrote: »

Nice one, you have just increased the tax of the high living :beer: pensioners and blue rinse brigade by 10%

Only for pensioner couples with taxable joint income of more than £19,000 - in association with transferable allowances, this will only affect relatively high earning pensioners. A single pensioner doesn't pay tax until their taxable income reaches £9,500. I don't see the problem. The govt already have pension tax credits to make up pensioners' income to what they regard as a basic living amount, together with paying rent etc., and a pensioner is very unlikely to have a mortgage. £9,500 tax free income or £19,000 tax free income for a couple is probably a hell of a lot more than the average working family after deducting their mortgage/rent costs. I also did make a caveat about potentially changing allowances and specifically mentioned pensioners if special attention is really needed for them!

ukcarper wrote: »

I can’t see scarping National Insurance and raising income tax to 30% would increase tax revenue I thought combined NIC and I/C tax was more than that now not taking into account employers contributions. I do agree that NI is just a tax and it would be better if it was combined with I/C tax.

Are you forgetting the army of self employed with their own limited companies who pay dividends (NIC free) and a small wage of only £5,700 to avoid paying NICs? There has been argument for years about how to tackle what HMRC regard as abuse - such a proposal would solve it at a stroke.

How about those city folk who structure deals so that the proceeds come out as capital gains or dividends rather than earned income - again massive amounts involved.

Oh, by the way, I forgot in my original posting to say that CGT rate should be put back to being at the same marginal rate as income tax rather than the currently ridiculously low level of just 18%, so tax gains at 30% or 40/45% - and at the same time bring back indexation allowance or taper relief to give credit for the length of time an asset has been owned - the withdrawal of this and the introduction of the single 18% was crazy, illogical and clearly not thought through.

Tr@cker

High income tax became a taboo in the Thatcher years, prior to that under Labour tax rates could be in the 90's % at the top end!

Income tax slowly dropped and so was born the introduction of stealth taxes and thats where we are now.

They are reluctant to tax the very wealthy too much or else they'd just take their money elswhere-better to have them here spending their money on minimal tax than not have them here at all

Being left-leaning i would support higher income tax everytime because i think its the fairest way.

But anybody who thinks very wealthy people are bothered about ' fairness ' generally speaking is very naive.

StevieJ

Pennywise wrote: »

Only for pensioner couples with taxable joint income of more than £19,000 - in association with transferable allowances, this will only affect relatively high earning pensioners. A single pensioner doesn't pay tax until their taxable income reaches £9,500. I don't see the problem.
.

The problem is that people looking forward to retirement have to plan far ahead, if they don't wish to end up in poverty, your idea of changing all the goalposts would encourage many not to bother. The recent pension reports were designed to encourage people to look after themselves (with a little assistance from the govt with tax allowances) during their retirement. Your ideas merely encourage people to rely on the state, e.g. credits, rent paid etc.

mrposhman

Ok its not a tax but how about all cyclists (especially in london) get given a free camera that they have to wear when cycling in london. Any motorist illegally entering the green cycle only zone at red traffic lights should be photographed with a £30 traffic enforcement notice being sent through the post to them.

Would improve the possibility of more cycling in london helping to meet targets in london for getting more people onto their bikes and would also raise some much needed cash.

Cyclists may need some sort of incentive but the idea of the camera is to ensure they don't just willy nilly write down number plates and send fines to them all. Photos are the proof of the offence and only then can the fine be adminstered.

It annoys me so badly when cars stop in these areas and then just stare at you blankly when you give them the evil eye. :mad::mad:

1984ReturnsForReal_2

Why not just borrow more??:whistle:

Pennywise

StevieJ wrote: »

The problem is that people looking forward to retirement have to plan far ahead, if they don't wish to end up in poverty, your idea of changing all the goalposts would encourage many not to bother. The recent pension reports were designed to encourage people to look after themselves (with a little assistance from the govt with tax allowances) during their retirement. Your ideas merely encourage people to rely on the state, e.g. credits, rent paid etc.

We're ALL going to have to face the pain of substantial tax rises in the next few years. Even without my proposed changes, pensioners will be paying more VAT, higher basic rate tax, etc. In actual fact, I'd say that introducing transferable allowances etc would greatly benefit far more pensioners (i.e. those with one spouse with pension over the allowance and the other under) than it would be detrimental to.

The Govts have themselves been moving the goalposts for pensioners for decades - what with taking away the dividend tax relief, constant rule changes, increasing pension age, withdrawing SERPS & introducing S2P. Not to mention existing private sector workers seeing massive falls in potential pensions. I'd say that tax rate changes are the least of their worries! - And of course, not a worry at all for those earning less than £19k per year as a couple - which is surely the vast majority of pensioners!

We're all going to be casualties of increased taxation, so it's a good time to make the entire system fairer and to reduce the scope for avoidance (legitimate loopholes or evasion). There are glaring irregularities and massive unfairness in the system which is already far too complicated. We have to take a step back, simplify it and take away some of the absurdities.

mramra

mrposhman wrote: »

Ok its not a tax but how about all cyclists (especially in london) get given a free camera that they have to wear when cycling in london. Any motorist illegally entering the green cycle only zone at red traffic lights should be photographed with a £30 traffic enforcement notice being sent through the post to them.

Would improve the possibility of more cycling in london helping to meet targets in london for getting more people onto their bikes and would also raise some much needed cash.

Cyclists may need some sort of incentive but the idea of the camera is to ensure they don't just willy nilly write down number plates and send fines to them all. Photos are the proof of the offence and only then can the fine be adminstered.

It annoys me so badly when cars stop in these areas and then just stare at you blankly when you give them the evil eye. :mad::mad:

A better idea would be cameras for motorists to photograph the cyclists that routinely jump red traffic lights, mount pavements etc. thus endangering themselves and fellow road users/pedestrians. :T

StevieJ

mramra wrote: »

A better idea would be cameras for motorists to photograph the cyclists that routinely jump red traffic lights, mount pavements etc. thus endangering themselves and fellow road users/pedestrians. :T

I would have massive fines for anyone caught parking on zebra crossings or even at restricted bus stops. The people that do this think they are way more important than than other peoples safety.