And there’s more good tax news on the horizon…
That’s sarcasm by the way.
A report issued this week by the Institute for Fiscal Studies (IFS), which is an independent bunch of tax experts who examine tax all day, has confirmed that 2011 is not going to be a good year if you wanted to pay less tax.
The tax and benefit changes due in April 2011 equate to a net loss (and Treasury gain) of £5.4 billion in 2011–12 which is the equivalent of £200 per household. Including yours. What’s worse, this is in addition to the effect of the VAT, fuel duty and other indirect tax increases in January which come out at a whopping £480 per household on average. With salaries already eroded by inflation, this is not great news for the average pocket.
Of course, not everyone (anyone?) is an average taxpayer and there will always be winners and losers. Unsurprisingly, the wealthiest will contribute the most, their tax changes exacerbated by the restriction on pension contributions, although it is one earner families with children who will be worst affected. At the other end of the scale, increasing the personal allowance to £7,475 will remove 500,000 taxpayers from the charge to tax, but mean 750,000 become higher rate (40%) taxpayers in the trade off.
The Government, of course ‘aspires’ (remember when that was a Liberal Democrat Pledge) to increase the personal income tax allowance to £10,000 in 2015–16, which would increase the number of higher rate taxpayers by a further 850,000 but take another million people out of income tax altogether. Which is probably a good thing.
The report concludes that the main winners from these reforms are non-working lone parents, being the only household type to gain on average, and low- to middle-income households without children. Amazingly, the reforms “will slightly weaken the incentive to work at all”.
Right. I’m off down the dole office.