Marriage Tax

You may have picked up from the headlines in various news media, that the Government have once again pushed the notion of married couples being able to share their personal tax allowances. This is a highly inflammatory issue as you may imagine. Those of us that are married probably did not do so in order to enjoy tax breaks. Frankly, I’m not sure why this issue has raised its head again.

In truth married couples already enjoy certain tax advantages. The most obvious being that there is no inheritance tax to pay between them and essentially they enjoy (or rather the wider family does) a doubling of the personal “nil rate band”. This assumes that they have a valid Will in place – not having a Will does rather reduce the impact of this valuable benefit.

In addition, capital gains tax allowances can also be shared across a married couple and of course one could argue that the ISA allowance, whilst being individual, enables a couple (married or not) to invest twice as much between them. So whilst there are reports of “backbenchers” (never named, if indeed they exist) calling for tax advantages for married couples, one might suggest that they already exist. However, this is about the personal allowance and essentially a married couple sharing unused personal allowances between them. According to the BBC website the Government initiative will save some people about £150 a year. Hang on? If the personal allowance is £9,440 in 2013/14 (for those under 65) this is how much each individual can earn tax free. So assuming a basic rate taxpayer (20%) would otherwise not enjoy any of this, then surely the tax advantage is 20% of £9,440 which is £1,888 of tax saved. Certainly this figure reduces if earnings are in excess of £100,000, at which point the effective rate of tax is 60% as the personal allowance is gradually withdrawn.

I know tax is complex – more so the more you earn and the greater your assets, but  for those on say £80,000 a year as a single income, then all that is really happening is a doubling of the personal allowance, to £18,880 before any income tax is payable. The next £32,010 will be taxed at 20% and then the remaining £29,110 would be taxed at 40%. The overall tax rate being 22.5% (income tax as % of £80,000). This against the current system of a single personal allowance and relevant tax rate of 27.2% and extra income tax of £3,776. As you will have gathered, the tax saving is on a case by case basis, but I cannot agree with the BBC’s figures of £150 saving – its closer to that each month, not each year. This prompts my often trodden path of “do they understand the figures? ” (both politicians and journalists).*

There can be numerous reasons for a spouse not to be working. This might be voluntarily, or enforced (redundancy of illness). The problem with every rule is that there is always likely to be a good case to be made for an exception and one can only really fall back on the principles of fairness to all. If this were truly any politicians cause, then we would not have such a complex tax system or benefits system. Both need to be simple and ideally with a single rate of tax and benefits across all forms of income, earned or paid as interest or dividends. This is certainly not a simple issue and as a result can only be for perceived political advantage. I don’t know about you, but I am fed up with politicians of any persuasion, trying to buy votes, we deserve better treatment than that surely. We would all like to pay less tax, naturally, but we also know that tax funds our infrastructure, healthcare, welfare, armed forces, governance and the wider economy, the real question is surely is tax fair? and if so, is is being spent wisely?

* It seems that the BBC figures are indeed correct. The current, or rather original proposal was to only allow £750 of the personal allowance to be shared between spouses, amounting to £150 (20% tax). It only applies to couples where the higher income member is a basic rate taxpayer and not available for higher rate taxpayers. So as usual, the devil is in the detail and all that this really suggests is the politicians cannot be trusted to tell a full story and frankly this is a lot of hot air….

Dominic Thomas – Solomons IFA

Marriage Tax2023-12-01T12:23:45+00:00

The Best Tax Systems In The World

The Best Tax Systems For Entrepreneurs

The UK is currently 16th in the world when it comes to the best tax system in the world for small to medium sized businesses. PWC, the big Accountancy firm conducted research on a global scale over several years. They considered the rates of tax, the time taken to pay it and comply with tax rules as well as the number of times tax has to be paid in a year. The UK’s position is improving, but still not in the top ten. This suggests that UK Governments are making it a little easier for entrepreneurs to start and develop their businesses. This after all is where economic growth is found and where wealth for individuals and the nation is created. However Ireland our closest neighbours is rather more favourable and ranked 6th by PWC.

Cutting Through The Red Tape

PWC are reported to have found that the typical UK SME now spends 267 hours a year complying with tax rules. A decrease of 54 hours over the eight year period that was reviewed, representing a 17% improvement. They also found that the average medium sized firm pays a tax rate of 44.7% on profits.

The Top Twenty Tax Systems

For those of you that like lists, the top twenty are as follows:

  1. United Arab Emirates
  2. Qatar
  3. Saudi Arabia
  4. Hong Kong
  5. Singapore
  6. Ireland
  7. Bahrain
  8. Canada
  9. Kiribati
  10. Oman
  11. Kuwait
  12. Mauritius
  13. Denmark
  14. Luxembourg
  15. Malaysia
  16. UK
  17. Kazakhstan
  18. Switzerland
  19. Norway
  20. Seychelles

Of course, entrepreneurs seek solutions to all manner of problems when it comes to running a business. A common trait amongst successful entrepreneurs is that they collaborate creatively and take responsibility for their actions. These are precisely the sort of people I work with.

The Best Tax Systems In The World2023-12-01T12:23:09+00:00
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