Taxation is always contentious and never easy, but for many the tax system needs reforming urgently. It is now more than six years since the introduction of the personal savings allowance in April 2004, which changed the tax treatment of savings.
The abolition of the personal exemption in April 2015 saw tax relief disappear for many lower-paid workers, and the flat 40% tax rate for all income earners introduced by the Tories in April 2017 created a huge new problem for a number of people who had previously benefitted from tax relief.
With a rapidly growing economy and a steadily increasing tax take, there has never been more need for tax relief and there will never be less money to fund it. The UK’s economic performance has been exceptional over the past decade, and yet more people have been pushed into tax difficulties than ever before.
What does tax relief look like? When people talk about tax relief, what they are usually thinking about is tax credits, and as a consequence this often becomes an ideological discussion. But tax credits are merely a tiny proportion of tax in any modern tax system.
Tax credits form just 1.3% of our national income tax take – and those under 35 are among the worst affected. The average single parent with children will lose an estimated £1,800 a year as a result of the coalition’s tax and benefits reforms.
For those with children who earn less than £30,000 a year, that can mean more than £5,500 a year lost to income tax. Tax relief on fuel and TV licences are all things which are in some way linked to fuel use and TV viewing, but are still available to millions of low-paid people.
People who work in hospitality can be particularly badly affected – they can claim tax relief on rent of about £200 a week, but still have to pay the tax for the rest. There is now tax relief on all fuel except electricity. There is tax relief on TV licences which makes them cheaper to buy.
Tax relief for young adults on benefits is limited and has been since 2010. Tax credit simplification is also not new; before 2010 most working families got a universal child tax credit. But the changes announced this week will also be applied to the child benefit. As well as all this tax relief, there are also things that are not part of the tax system, including Universal Credit. That is why it is essential that tax relief for low-paid people does not get lost within other changes to the system.
That is why we will fight hard to make sure that Universal Credit does not replace tax credits, or that benefit increases are not at the expense of benefit changes. Tax relief on child benefit and Universal Credit has been at the centre of our policy approach since 2010. That is why we launched our campaign A Generation on Benefit – and again last month launched another campaign, A Generation on Living Standards. This is about ensuring that the changes announced
For more details about how tax relief services could help with your tax debts, call (888)489-4889 for a free consultation.