Tag: taxation

TUC: Ministers should boost wages, not slash taxes, in emergency budget

  • Union body says government must prioritise lifting workers’ pay over “bungs to big business and City bankers”
  • **New TUC analysis** shows real wages are down £100 a month compared to same period last year
  • “Don’t reheat failed Osborne-era policies”, TUC warns Chancellor

The TUC has today (Thursday) called on the Chancellor to bring forward an emergency budget that delivers for “working Britain”.

In a submission to the Treasury, the union body warns the government not to repeat the same mistakes of the “Osborne era” when pay and public services were slashed and huge tax breaks were given to big business.

The TUC says the priority for ministers must be to get wages rising across the economy and to fix the staffing crises plaguing hospitals, social care, education and other frontline services.

Pressure on wages

New analysis from the union federation shows that real wages down are down by over £100 a month compared to this time last year – a number that rises to £190 for public sector workers.

For the typical nurse this means a real-terms pay cut of £1,000 over the next year and a real-terms pay drop of £4,300 since 2010.

The TUC says rather than “handing out bungs” to corporations and City bankers the government should:

  • Bring forward inflation proof increases in the minimum wage, universal credit and pensions to October to help families through the cost-of-living emergency.
  • Get the minimum wage on a path to £15 an hour as soon as possible.
  • Give public service staff a real-terms pay rise that at least matches the rising cost of living and begins to restore earnings lost over the last decade.
  • Strengthen and extend collective bargaining across the economy, including introducing fair pay agreements to set minimum pay across whole sectors.
  • Impose a larger windfall tax on oil and gas companies that that are profiteering from UK families.
  • Make sure everyone pays their fair share of taxes by going ahead with increases in corporate tax, and equalising capital gains tax rates with income tax as a first step to fair taxes on wealth.

Speaking ahead of Friday’s emergency budget, TUC General Secretary Frances O’Grady said: “Friday’s mini budget is an acid test for this government. Are ministers on the side of working people, or more interested in handing out bungs to big business and City bankers?

“Tax cuts will do nothing to jumpstart the economy and will only line the pockets of the wealthy and companies like Amazon.

“When millions are struggling to make ends meet, the Chancellor should focus on getting wages rising across the economy – not helping out corporations.

“That means a £15 minimum wage as soon as possible, boosting universal credit and fair pay deals for workers across the economy.

“And it means ensuring those who’ve profited from this crisis pay their fair share – with a bigger windfall tax on oil and gas giants like Shell and BP, and new taxes on wealth.”

On the need to avoid repeating the mistakes of the past, Frances added: “We need a budget the delivers for working Britain – not more continuity conservatism.

“Kwasi Kwarteng mustn’t reheat the failed policies of the Cameron-Osborne government, which slashed pay, workers’ rights and public services.

“This pushed people into debt and locked families into years of declining living standards.

“After the longest wage squeeze in modern history, people can’t afford to tighten their belts any more.”

Tax cut worth up to £330 comes in for 30 million workers

  • 30 million people across the UK will benefit from the biggest personal tax cut in a decade from today
  • ‘Hard working Brits’ will save up to £330 per year – 2.2 million lifted out of personal tax altogether
  • 70% of UK workers now paying less National Insurance, even after accounting for the Health and Social Care Levy
  • 30 million people across the UK will benefit from the biggest personal tax in a decade from today – with hard working Brits saving up to £330 per year.

The £6 billion tax cut will see the level at which people start paying National Insurance rise to £12,570 – lifting 2.2 million people out of paying any personal tax and ensuring people get to keep more of the money they earn.

The threshold change means that 70% of UK workers will pay less National Insurance, even after accounting for the Health and Social Care Levy that is funding the biggest catch up programme in NHS history and putting an end to spiralling social care costs.

Speaking before his resignation last night, former Chancellor of the Exchequer Rishi Sunak said: “I know rising prices are putting pressure on hard-working families across the UK – which is why we’ve stepped in to help to ease the burden with a £37 billion package of support this year, including at least £1,200 going directly to the 8 million most vulnerable families.

“Today marks the next stage in that package, with the biggest personal tax cut in over a decade coming in to help millions of workers across the UK keep up to £330 more each year.”

The Prime Minister (at time of writing, anyway – Ed.) said: “We know it’s tough for many families across the UK, but we want you to know that this government is on your side.

“Today’s tax cut means around 70 per cent of British workers will pay less National Insurance – even after accounting for the Health and Social Care Levy that is funding the biggest catch up programme in NHS history and putting an end spiralling social care costs.

“So whether you are a receptionist, work in hospitality or are a delivery driver, this tax cut is likely to make you and your family better off.”

From today the level at which people start paying National Insurance has risen from £9,880 to £12,570.

This change means that millions of people working across hundreds of different industries across the UK will now be better off.

This includes bricklayers who’ll save £218, care workers who’ll save £324, hairdressers who will get a £118 benefit and nursery assistants who’ll get a £343 yearly boost.

Workers can check their salary in the government’s online tool to estimate the amount they could save between July 2022 to July 2023.

The last major personal tax cut of today’s magnitude was nearly ten years ago, when the income tax personal allowance increased by £1,100 in 2013. Today’s threshold change is more than double that, as working people are now able to hold on to an extra £2,690 free from tax.

Today’s change to National Insurance thresholds comes as part of the Chancellor’s wider vision for a lower tax economy. At the Spring Statement Mr Sunak announced a 1p income tax cut in 2024 – which will be the first cut to the basic rate in 16 years and will save the average taxpayer a further £175 a year.

The Chancellor also committed to cutting and reforming business taxes later this year in the autumn, to help spur business growth and productivity. The government is currently working with industry on how best to do that.

The increase to the National Insurance thresholds will leave around 76% of National Insurance payers in the North East better, 75% in the North West and Merseyside, and 62% in London.

Today’s landmark personal tax cut also comes as the government launched new Help for Households campaign designed to raise awareness and signpost people to the £37 billion in support on offer and targeted at those most in need.

The support provides millions of the most vulnerable households at least £1,200 of support in total this year to help with the cost of living, with all domestic electricity customers receiving at least £400 to help with their bills.

It also includes a 5p fuel duty cut – the biggest cut ever to fuel duty rates, a rise in the national living wage to give full time workers an extra £1,000 and a cut to the Universal Credit taper rate to provide over 1 million families an extra £1,000.

The NICs threshold change takes effect following the government making tough but responsible decisions to manage the public finances responsibly and choosing not to saddle future generations with almost £400 billion of debt used to protect jobs and the economy during the pandemic – worth around £5,500 for every person in the UK.

The government had planned for this good news story to be the big news event of today, but those plans were scuppered by the resignation of two senior cabinet ministers last night. As former Prime Minister Harold MacMillan once ruefully observed: “Events, dear boy. Events” …

National Insurance cut reaches key milestone

  • Bill to deliver £330 national insurance contributions cut announced by the Chancellor at the Spring Statement gets Royal Assent
  • Change means threshold at which individuals start to pay NICs will rise by almost £3,000 and align with the income tax personal allowance from July
  • 70% of workers who pay NICs will pay less, even after accounting for the introduction of the Health and Social Care Levy

The UK government’s measures to tackle the cost-of-living crisis reached a key milestone this week, after a bill to raise NICS thresholds by almost £3,000 and deliver a tax cut worth over £330 for a typical employee in the year from July became law.

The National Insurance Contributions (Increase of Thresholds) Act, which received Royal Assent on Thursday, raises the threshold at which individuals start to pay NICs, aligning it with the income tax personal allowance at £12,570 from July 2022.

Around 2.2m working age people will be taken out of paying Class 1 NICs, applying to employees, and Class 4 NICs, for the self-employed, altogether. From July, around 70% of workers who pay NICs will be better off, even accounting for the introduction of the Health and Social Care Levy.

At the Spring Statement the Chancellor set out a tax plan that will help families with the cost of living, support growth in the economy, and ensure the proceeds of growth are shared fairly. As well as the NICs threshold rise it included a 12-month-long 5p cut to fuel duty and a cut in the basic rate of income tax, to 19p in the pound, taking effect in 2024.

Chancellor of the Exchequer Rishi Sunak said: “I know people are worried about making ends meet, with global supply chain challenges and Russia’s invasion of Ukraine driving up the cost of living for families across the UK.

“That’s why this tax cut for almost 30 million people is so important. And it’s part of further support worth over £22 billion in 2022-23 to help with the cost of living, by helping people with their energy bills and ensuring people keep more of their money.”

Thanks to above inflation increases in the income tax personal allowance and the NICs Primary Threshold since 2010-11, a typical basic rate taxpayer earning £24,000 in 2022-23 will pay £1,140 less in income tax and NICs than they otherwise would have, even after accounting for the Health and Social Care Levy.

That comprises £760 less income tax and around £380 less NICs in 2022-23 compared to what they otherwise would have paid.

The July threshold rise is a tax cut for a typical employee worth over £330 in the year from July 2022; the equivalent saving for a typical self-employed person, who pay lower NICs rates, would be worth over £250.

The UK Government has taken action worth over £22 billion next financial year to help with the cost of living including the fuel duty cut, increases to the NICs thresholds and an extra £500 million for the Household Support Fund to help those most in need.

They say they’re also helping low-income families keep more of what they earn by reducing the Universal Credit taper rate, boosting incomes by £1000 per average full time worker by increasing the National Living Wage and providing over £9 billion to help with rising energy bills.

2022 set to be ‘Year of the Squeeze’

2022 is set to the ‘year of the squeeze’, with real wages set to be no higher next Christmas than today, and families face a typical income hit of around £1,200 a year from April as a result of tax rises and soaring energy bills, according to new Resolution Foundation research published today.

The Foundation’s latest quarterly Labour Market Outlook looks ahead to how workers and families will be affected by the big economic shifts in 2022.

It notes that while Omicron is rightly at the forefront of people’s minds at present, it is unlikely to be the defining economic feature of next year as the wave is expected to be relatively short-lived.

Instead, 2022 will be defined as the ‘year of the squeeze’ for family budgets, with inflation set to peak at 6 per cent in Spring 2022 (its highest level since 1992) and pay packets stagnating as a result.

The report notes that real wage growth was flat in October, almost certainly started falling last month, and is unlikely to start growing again until the final quarter of 2022. As a result, real wages are on course to be just 0.1 per cent higher at the end of 2022 than at the start.

By the end of 2024, real wages are set to be £740 a year lower than had the UK’s (already sluggish) pre-pandemic pay growth continued. This shows just how much the Covid-19 crisis has scarred pay packets across Britain, says the Foundation.

The peak of the squeeze will come in April, says the report, which risks being a cost of living catastrophe as energy bills and taxes rise steeply overnight.

The cap on energy bills is expected to rise by around £500 a year. Coupled with a further £100 rise to recoup the costs associated with energy firm failures, this could mean a typical energy bill rising by around £600 a year.

This rise will fall disproportionately on low-income families as they spend far more of their income on energy. The share of income spent on energy bills among the poorest households is set to rise from 8.5 to 12 per cent – three times as high as the share spent by the richest households.

Higher-income families will instead by disproportionately affected by rising tax bills in April. The average combined impact of the freeze to income tax thresholds and the 1.25 per cent increase in personal National Insurance contributions is £600 per household. For families in the top half of the income distribution, the NI rise alone will raise tax bills by £750 on average.

The Foundation says the scale of this April cost of living catastrophe, at a time of falling real wages, means the government is likely to have to act.

While there is little the Chancellor can do in the short-term to tame inflation or boost wage growth, the welcome 6.6 per cent rise in the National Living Wage next April should protect the lowest earners from shrinking pay packets.

The top priority for further action should be tackling rising energy bills, says the Foundation. Options for doing so include:

  • Reducing the size of the energy cap rise directly. Compensating energy suppliers for a six month, £200 reduction would cost around £2.7 billion, or £450 million if focused on lower-income households on Universal Credit.
  • Extending the time period over which the costs of supplier failures are recouped, with the £100 bill rise reflecting a policy of recouping costs over a single year.
  • Moving environmental and social levies currently added to electricity bills into general taxation, saving households £160 per year and costing up £4.5 billion per year.
  • Extending and increasing the Warm Homes Discount.

Torsten Bell, Chief Executive of the Resolution Foundation, said: “2022 will begin with Omicron at the forefront of everyone’s minds. But while the economic impact of this new wave is uncertain, it should at least be short-lived. Instead, 2022 will be defined as the ‘year of the squeeze’.

“The overall picture is likely to be one of prices surging and pay packets stagnating. In fact, real wages have already started falling, and are set to go into next Christmas barely higher than they are now.

“The peak of the squeeze will be in April, as families face a £1,200 income hit from soaring energy bills and tax rises. So large is this overnight cost of living catastrophe that it’s hard to see how the Government avoids stepping in.

“Top of the Government’s New Year resolutions should be addressing April’s energy bills hike, particularly for the poorest households who will be hardest hit by rising gas and electricity bills.”

Average Inheritance Tax bill in Scotland nears £200,000

  • New figures show average inheritance tax bill in Scotland for deaths in 2018/19 was £195,798, an 8.5% increase from the year before
  • This compares to the average bill in the UK of £209,502
  • Average bill in London was £271,820 and in Wales it was £155,963
  • Only 252 people paid IHT in Northern Ireland but forked out £40m between them
  • Although there were only 22,100 bills on UK deaths in 2018/19 – this number is expected to grow after Chancellor froze allowances for five years

The average inheritance tax bill in Scotland has climbed 8.5% towards £200,000 according to latest HMRC figures.

There were 1,190 deaths in Scotland in 2018/19 that resulted in an inheritance tax bill, and the average bill was £195,798. This was up from £180,469 the year before.

Only 3.7% of UK deaths resulted in an inheritance tax bill in 2018/19, but that percentage is expected to rise following Rishi Sunak’s decision to freeze the tax-free allowances for the next five years to help pay the Coronavirus bill.

And these latest figures show those families that do pay the 40% tax can end up forking out large sums of money.

2018/19 Inheritance Tax billsNumberAmountAverage bill
      
UNITED KINGDOM 22,100£4.63bn£209,502.26
      
England  18,900£4.02bn£212,698.41
North East                                              347£61m£175,792.51
North West                                            1,380£211m£152,898.55
Yorkshire and the Humber                                              979£171m£174,668.03
East Midlands                                       929£166m£178,686.76
West Midlands                                     1,260£226m£179,365.08
East of England                                     2,520£504m£200,000.00
London                                     4,010£1.09bn£271,820.45
South East                                              4,930£1.06bn£215,010.14
South West                                            2,590£524m£202,316.60
      
Wales                                      654£102m£155,963.30
      
Scotland                                   1,190£233m£195,798.32
      
Northern Ireland                                252£40m£158,730.16


*Source: HMRC inheritance tax stats

Sean McCann, Chartered Financial Planner at NFU Mutual, said: “Inheritance tax is feared by many but paid by relatively few. But with the average bill in excess of £200,000, it can make a significant dent in a family’s wealth for those that do get caught in the net.

“With the tax-free allowances frozen for the next five years, rising asset prices and a heated housing market, a growing number of families will be impacted.

“It’s critical that families concerned about being caught by Inheritance tax seek advice as early as possible. The earlier you plan the more options you have to mitigate any potential bill.”


Ways to reduce your inheritance tax bill

With more and more families expected to pay inheritance tax over the next five years, for those with assets above the tax-free allowances, there are some simple ways to reduce your future bill:

  • Don’t touch your pension until you have to

Any money that is left in someone’s pension fund when they die is normally free of inheritance tax so make it the last thing you spend. Most other savings and investments are subject to inheritance tax but pensions are not.  

  • Use business reliefs

If you leave a qualifying business behind then you may be able to pass it on tax free because of Business Property Relief.

  • Take out life insurance

Life insurance policies don’t reduce the bill itself but can provide a lump sum to your family to help them pay the bill. However, make sure that it is written in a trust so that the insurance policy itself is not included in the estate.

  • Make gifts

One great way to reduce the value of your estate is to give some of it away during your lifetime. Some gifts are immediately free of IHT. You can give up to £3,000 away each tax year, if you haven’t used the previous year’s allowance you can go back one year and get it.

You can also make gifts on marriage to your child (£5,000) a grandchild (£2,500) or anyone else (£1,000). You can also make unlimited gifts from your income, provided they are regular and don’t impact your normal standard of living. For most other gifts you need to survive for seven years or they will be clawed back into your estate.  

Latest inheritance tax stats from HMRC available here:

Inheritance Tax statistics: commentary – GOV.UK (www.gov.uk)

1.8 million couples benefitting from extra tax relief

Nearly 1.8 million married couples and those in civil partnerships are using Marriage Allowance to save up to £252 a year in Income Tax, HM Revenue and Customs (HMRC) has announced.

Summer has always been a popular season for weddings, and newly married couples or those in civil partnerships could be eligible for the tax saving. And even if they have been married for years, a change in circumstances could also mean they are newly eligible.

Marriage Allowance allows married couples or those in civil partnerships to share their personal tax allowances if one partner earns an income under their Personal Allowance threshold of £12,570 and the other is a starter, basic or intermediate rate taxpayer.

They can transfer 10% of their tax-free allowance to their partner, which is £1,260 in 2021/22. It means couples can reduce the tax they pay by up to £252 a year. Couples can backdate their claims for any of the four previous tax years, which could be worth up to a total of £1,220.

It is free to apply for Marriage Allowance and the easiest way for taxpayers to check eligibility and make a claim to receive 100% of the relief they are entitled to is via GOV.UK.

Angela MacDonald, HMRC’s Deputy Chief Executive and Second Permanent Secretary, said: “Marriage Allowance lets eligible couples share their Personal Allowances and reduce their tax by up to £252 a year.

“Nearly 1.8 million couples are already using the service – it is free, quick and easy to apply, just search ‘marriage allowance’ on GOV.UK.”

Married couples may have experienced a change in their circumstances which could now mean they are eligible for Marriage Allowance, including:

·         A recent marriage or civil partnership

·         One partner has retired and the other remains working

·         A change in employment due to COVID-19

·         A reduction in working hours which means their earnings fall below their Personal Allowance

·         Unpaid leave or a career break, or

·         One partner is studying or in education and not earning above their Personal Allowance

If a spouse or civil partner has died since 5 April 2017, the surviving person can still claim by contacting the Income Tax helpline.

Marriage Allowance claims are automatically renewed every year. However, couples should notify HMRC if their circumstances change.

Edinburgh firms hit for an additional £7,653,000 a year by SNP’s “high-tax agenda”

Businesses in Edinburgh have been hit by an additional £7,653,000 thanks to the doubling of the large business rate supplement by the SNP, according to the Scottish Conswevatives. Continue reading Edinburgh firms hit for an additional £7,653,000 a year by SNP’s “high-tax agenda”

New tax bands take effect in Scotland today

More than two-thirds of taxpayers will pay less on their current income this year under Scotland’s new tax bands. Changes to the Higher and Top rate tax bands, which take effect from today, also mean an additional £428 million will be available in 2018/19 to invest in vital public services and the economy.

Continue reading New tax bands take effect in Scotland today

Finance Secretary: Income tax reforms will benefit lowest earners

More than two thirds of income taxpayers will pay less tax next year on their current income, Finance Secretary Derek Mackay has confirmed as MSPs prepare to debate proposals to reform income tax in Scotland. Continue reading Finance Secretary: Income tax reforms will benefit lowest earners