Avoiding UK Tax? You could be named and shamed – Budget 2009

One aspect of the 2009 budget was a initiative to make people pay their taxes more by threatening to “name and shame” them on the HMSC website.

The budget report states:

Legislation will be introduced, to be bought into effect by Treasury Order, enabling HM Revenue & Customs to publish the names and details of individuals and companies who are penalised for deliberate defaults on or after 1 April 2010 leading to a loss of tax of more than £25,000.

What could be better disincentive for an upright British gentleman businessman, dependent on his reputation, than to avoid having his name splashed across a virtual “naughty step”?

This could be a nod to the public outrage over pensions and such like, angry at the notion of rich bankers suspected of playing the system and so avoiding paying their fair share of tax. This is in addition to a pretty much purely symbolic of adding a 50% tax bracket on the £150,000 bracket – a move that will only bring in £1billion worth of income, small fry compared with the huge sums of ever increasing debt the UK faces for the next 10 years.

The “name and shame” scheme has already been tried in Ireland to good effect, improving tax revenues.

Why not just tie them to the village green stocks and supply free rotten tomatoes to the public – such a move I’m sure would add 10 points to their opinion polls overnight!

Read it for yourself at the hm-treasury website – this is where YOUR money is being spent, you have a right to know where!

Financial Statement and Budget Report

* Chapter A (PDF 307KB)
* Chapter B (PDF 488KB)
* Chapter C (PDF 436KB)
* Lists of abbreviations, charts and tables (PDF 49KB)

What UK citizens get for their taxes per week

Carrying on with our series on where does your money go, lets use those figures from the post – How Much Money The Average UK Family pays in tax

That post concluded, after income tax and all the other tax such as VAT the average family pays £201.34 in tax. Bear in mind this is last years figures, now we own half the banks our public debt is a lot higher – we’ll cover that next.

But how much has been spent already? From the Guardian money wall-chart we can get a rough idea.

Of our money given in tax in 2007/2008:

• 18% to the Dept of Health
• 10.3% to Education
• 23.3% to work and pensions
• 21.3% for benefits
• 5% for debt interest – this is obviously going to be a lot higher in 2008/2009
• 6% to the Ministry of Defence
• 3% for transport policy
• 5% for Scotland
• 2.5% for Wales
• 1% for Northern Ireland
• 3.6% for Universities
• 3% for Tax Credits
• 1% to decommissioning Nuclear Waste
• 0.5% for Iraq/Afganistan Wars
• 1% to Policing

Using these figures, an average family earning £32,799 a year contributes, each week:

• £36 to the NHS
• £21 for our schools
• £47 for the OAP’s
• £43 for those on benefits
• £10 on the public debt interest
• £12 for the Army, Navy and Airforce
• £6 for the roads and rail
• £10 for Scotland
• £5 for Wales
• £2 for Northern Ireland
• £7.25 for Universities
• £6 for tax credits
• £2 storing nuclear waste
• £1 the Iraq/Afghanistan wars
• £2 for the police

Where UK Taxes Go – The Wallchart

Thanks to Burning Our Money who put me on to the Guardian chart showing how our taxes are spent by the Government – the full pdf can be seen here.

Where Our Money Goes

I’ll be pouring over this chart and looking to use it as a road map for investigation in coming up posts.

How Much Money The Average UK Family Pays In Tax

The name of the site is Where Does It Go, so here is a some information on where your money goes in regards to tax.

According to a BBC survey in November 2007, the average income for a family with 1.9 kids is £32,779, or £630 a week.

BBC NEWS | UK | The UK family: In statistics

Assuming 22% tax (20% in 2008) this equates to a family paying £126 income tax a week.

We currently pay 0% tax on:

• food
• books, newspapers and magazines
• children’s clothes

And a reduced rate of 10% on:

• reduced rate
• fuel power
• energy saving
• residential conversions

Everything else is at standard 17.5%.

• Food – £60 – No tax
• Alcoholic drinks/ cigarettes – £15 – Tax: £1.50 (Source)
• Clothing – £35 – children’s clothes no tax; assume adults get £20 taxed at 17.5% – Tax: £2.50
• House fuel – £45 – Tax: £2.25
• Household goods – £40 – Tax:£5.00
• Health – £5 – Tax:£0.85
• Transport – £80 – Fuel tax of 80% (Source) – Assume petrol is £40 – Tax:£30
• Communication – £15 – Tax: £2.62
• Recreation – £80 – Tax: £14
• Education – £20, Assume they are books – No Tax
• Restaurants/hotels – £45 – Tax: £7.87
• Misc goods – £50 – Tax: £8.75
• Other – Mortgage interest, holidays, fines, licences – £105 – assume no tax

TOTAL: £75.34
TOTAL INCLUDING INCOME TAX: £201.34

I have tried to err on the side of caution in assigning rough figures, if you have suggestions for modifying this please let me know.

In conclusion: 31% of your money goes straight back to the government. How do YOU want it spent?

Learn more on VAT here
VAT calculator

Inflation and Insulation

Carrying on with Darling-Brown’s measures to aid the voters before the next election, the Government announced measures to give free insulation to the poorest families, and half price for every one else.  This actually sounds like a great idea, and is another bit of evidence showing the credit crunch may be bad for the banks but actually good long term for the planet, seeing as this move comes in the same week as oil prices dip under $100 a barrel due to falling world demand.  The BBC story is found here.

This won’t do much to lessen the blow for families short term however, with all UK fuel companies putting up prices in preparation for increased winter demand. Its estimated electricity bills are going to go up by £500 a year by 2010, an extra £10 a week. With inflation currently at 4.4% everyone in the UK is finding themselves with less money in their pocket.

Why did the inflation leap so much?  Its the consequence of UK banks flooding more cash into the bank system in April where an extra £50billion was pumped into the system.  Every note that is printed means the rest are worth less.

Some say money is the price we pay for civilization, but does that mean it has to be fiat money system?  The £ used to be pegged to the price of gold, one Troy pound was equal to one pound note.  In 1844 the Bank of England was made the only bank that was allowed to issue banknotes, with exception for the Scottish banks. At the beginning, pound notes were only printed when there was a surplus in the Bank of England of gold to back it up. This did mean higher interest rates to keep the gold standard supply.

The gold standard was abandoned just before the First World War, which virtually crippled the UK, only exasperated by the Second World War. The UK entered decades of decline, only halted by the discovery of North Sea oil.  Now we employ a fiat money system borrowing is easier, but are we better off?

UK Tax Rebate in simple figures

September 2008 – What is all this talk about UK tax rebates, and does it affect you?

• 5 million low paid workers were losing out due to the abolition of the 10p tax rebate – this is roughly classed as all those who earn less than £17,000 a year.
• The rebate is the Government saying they got it wrong (after intense political pressure) and attempting to recompense, at the cost of around £2.7 billion to the country.
• The tax rebate will be given in your next pay-slip, or next year if you’re self employed when you declare your taxes.
• The rebate was done by changing how much taxable income you are tax free on – increasing from £600 to £6035.
• There are still losers – those earning £8-10,000 were to lose £200 a year from the new tax laws – the rebate should give back £120 so they will still be losing £80 compared to pre-budget.
• People earning from circa £17,000 to £40,835 gain from the rebate, as they were better off before anyway under the 10p tax rate abolition and now get the rebate on top.

Is this fair? What would you have done?

Resources:

Use a salary calculator to work out how much you will pay.

De Ja Vu? MP Darling defends stating the UK Economy is going into recession

Aug 30th – 2008 Darling recently had a piece in the Guardian where he told us:

UK Chancellor Alistar Darling

“the economic downturn would be “profound and long-lasting”,
“…has insisted it is his duty to be straight with the
public, after telling a newspaper the UK faces its worst economic
crisis in 60 years.”
“…that voters were “pissed off” with Labour’s handling of the
economy, a key issue at the next election, and said it was “absolutely
imperative” that ministers communicated their intentions better.”

Basically, we’re fucked and going to have a recession.

And now the PR exercise starts trying to educate the masses that it is not Labours fault.
Watch the BBC interview where Darling repeats, 4 times, parrot fashion, the mantra’s the PR men have told him to say. To every question asked him his answer is:

• I’m being honest
• Every other country in the World
• Unique Circumstances
• Credit Crunch
• Rising Oil and Food Prices
• We helped Northern Rock
• Tax Rebate next month
• Helping People getting back into work
• Fundamental of Economy Sound

“Who’s going to win Eurovision this year?” “Honestly, every other country in the world has rising oil and food prices, I remember when we helped northern rock I was going to give a tax rebate next month…blah blah blah…I think they should bring back Cliff Richard.”

I do notice that not having a TV makes you more aware of the repetitious Squealer type announcements. Lets break it down a bit:

• I’m being honest – Why do I get jittery when a politician starts with that?
• every other country in the world - Asia seems to be unaffected thus far
• Credit Crunch – buzzword for people at the moment – basically free credit to everyone will eventually bite you on the arse
• Rising Fuel and Oil Prices - didn’t Mr Murdoch say it was morally correct to invade Iraq for a “$20 a barrel oil”?
• We Helped Northern Rock – Nationalising a bank under intense pressure after failing to find it a buyer, placing £1.3 billion more in national debt.
• Tax Rebate next month – What tax rebate? The one where companies can claim back VAT they shouldn’t of paid in the first place because they overpaid?
  Or the rebate to make up for the blunder of not noticing abolition of the 10p tax rate would put the lower paid workers out of pocket?

Car Tax Rules

A new bill to factor into your expenses this year are the new car tax rules – if you’re buying a car first registered after 2001 then the car tax you pay is set to change, due next year.

If you buy a very fuel efficient car, you could pay no car tax, but a gas guzzler could cost you £455 a year.

A BBC information page gives you the typical tax for the leading cars being sold today, find it here.

You may need to bear this in mind if your selling a car from after 2001 also, since the car may have been instantly devalued, or you may be lucky to find it has increased in value, since buyers will factor in they will pay no car tax on a highly economical motorcar.

There has been some backlash from the press that this tax will affect the poorest more, and Gorden Brown also faces backbench rebellion due to it acting retrospectively, hitting drivers who had no knowledge of the tax when they bought their car.

Like many government initiatives at the moment, the measure seems to have good intentions (cutting CO2 levels) but hitting the wrong type of people in the pocket, which after all is the majority’s main concern.

Judging by the pressure on Gorden Brown recently, this measure could be taken down, but expect some kind of initiative targeting green cars soon.

Its been a real noticeable change in policy in the UK where environmental concerns take front stage – as a child in the 80s I remember such initiatives would have been part of the “loony left”.

Tags: cartax, budget tips, car

Working Tax Credits – Do It

I keep meeting self employed people who haven’t heard of this scheme – which is a real shame as its brilliant. 

Basically the motive is to make it worthwhile for people to work – a lot of Tory propaganda in the 80s was aimed at the council estate single parent mum who had loads of kids to get benefits – it was more worthwhile to do that than to actually work. 

Tax Credits seek to correct that by making it more worthwhile to work – if you qualify you get a weekly or monthly payment to bump up your earnings.

If you work more than 30 hours (16 for parents) and earn less than roughly £15,000 – you qualify.

For self employed people this is even more attractive as the costs of the business as taken into account – only actual profit counts against the earnings.

My brother took on tax credits after many urgings from me when he was a musician in Cornwall – after arranging his NI contributions (£10 a month), he got in contact with tax credits – he sent in evidence of his work hours, a diary of jam practices and gigs, along with promotion posters, and recieved the tax credits within 6 weeks of roughly £45 a week.  Not enough to retire on sure, but worth enough to cover petrol getting around. 

One other thing to note is even if this year you are earning over the threshold, Tax credits works on the last tax year up to April – so if you earn £20,000 this year but only £6000 the year before – you may qualify.

Resources:

HM Revenue And Customs Info on Tax Credits

CAB Self Employment Checklist

Tags: taxcredits, budget tips, self employed