Jonna Noble, money editor at the Times and Sunday Times in an article ahead of the Budget has called on Rachael Reeves to create a family friendly tax system.
Jonna Noble, money editor at the Times and Sunday Times in an article ahead of the Budget has called on Rachael Reeves to create a family friendly tax system.
In his Rose Garden speech on 28 August 2024 Keir Starmer said that those with the broadest shoulders should bear the heaviest burdens. This is not what happens as far as income tax is concerned. Has Keir Starmer been told this?
Tax and the Family say the cut in national insurance makes little difference to families with low or modest income.
Tax and the Family has updated its analysis of the tax system to take account of the Spring Budget and changes to benefits. The analysis takes account of the latest income data. It is still the case income tax liabilities are unrelated to household income with the result some families in poverty are paying tax. Treasury figures show that a family with an average household income may pay the same tax as a single adult in top 10%.
From 1 April the National Living Wage, the legal minimum for workers aged 21 years and over, increased by £1.02 from £10.42 to £11.44 – a 9.8% increase.
In a letter published in The Guardian newspaper, Don Draper of Tax and the Family explains why even families with high earnings are struggling.
A poll of over 2000 adults for the Family Hub Network suggests that voters would strongly support a more family friendly tax system. 70% say that income should be taxed on the basis of household income, not, as now, on individual income. There was strong support for family tax cuts in the forthcoming Budget, particularly among people with dependent children.
An important new IFS report explains and examines the thresholds built into the income tax system, such as the Personal Allowance and the rate bands and the tapering of the allowance on incomes over £100,000. It highlights the problems present for these taxpayers. Exceeding a threshold may make a taxpayer materially worse off – thresholds create economic barriers.
Many people probably don’t realise how high their marginal rate of tax is and therefore how little they gain from an increase in income. Many politicians don’t seem to know. Do you know? Leonard Beighton has explained how income tax, national insurance and benefit systems overlap and as a result many of the least well off households have in effect a 68% tax rate. For some their tax rate will be higher.
Families will welcome the cut in the national insurance contribution (NIC) rate from 12% to 10 % from 6 January 2024: with income tax at 20% that will mean a combined rate of 30%. However for the substantial number of families who both pay tax and nic but are entitled to universal credit, the tax saving will be much smaller than the Chancellor said.
Interviews, films and Tweets
Interview with Lord Lawson
Family Tax – is it Fair?
Actors have been used in parts of this video.
A Real Life Example
Tax & the Family visited a one-earner couple with three children to find out more about how the Tax System affects them. Edited by Heart & Soul Films Ltd.
Donate
Tax and the Family Charitable Trust has been accepted by HMRC as a charity and can accept GiftAided donations. The organisation is non-profit and provides information, guidance and consultation for anyone involved in tax policy and families. We depend on individual donations for support to carry out our work.
If you would like to donate then please visit our JustGiving page: www.justgiving.com/taxandthefamily.
Published Reports
Latest Reports
We regularly publish reports that help inform policy makers, journalists, researchers and other professionals that deal with matters of taxation. Here you can read some of our reports.
This report, which is based on recently published OECD data, examines how UK households were taxed in 2023 (UK tax year 2023-24). It compares the UK with the OECD as a whole and with three other individual members (France, Germany and the US). It updates information provided in a similar report for 2022.
The main problem is that income tax liabilities are unrelated to household incomes with the result families in poverty may be paying tax as well as receiving universal credit. The overlap of the tax and benefit systems traps families in poverty and results in many families having a high marginal tax rate – a higher rate than applies to taxpayers earning over £125,000.
This report considers how UK households are taxed compared with their counterparts in other developed countries.
Breakthrough! Tax and the Family make a proposal for resolving the one earner/two earner unfairness in the High Income Child Benefit Charge which meets previous objections.
The tax burden is increasing for everyone but people with children are the worst affected. They have the lowest incomes yet bear a disproportionately high share of the income tax burden and the Treasury take back almost 70% or more of any extra money they earn.
Tax is a key political issue. To get the economy growing do taxes need to be cut? Or do they need to be increased to deal with the hole in the government’s finances?
Tax and the Family together with the charity CARE published on 30th March their annual report on the taxation of families in the UK and other OECD countries. The report calls for fairer taxation - not necessarily lower taxation. The report is timely.
Although the income tax system in Scotland differs from that in the rest of the UK, many of the problems are the same.
This report addresses issues relating to the taxation of UK families:
how heavily they are taxed compared with their counterparts in other developed countries
how they are taxed compared with households without children
changes to the UK tax and benefits system that would ensure fairer outcomes.
An earlier paper by Tax and the Family analysed which types of household bore the heaviest income tax burden. This paper extends the analysis to cover families with three or four children.
Resources
Tax Tables
Tax tables developed by Tax and the Family enable users to model the impact of income tax and benefits on family finances. The tables for the tax year 2023/24 do not take account of the cut in national insurance which takes effect from 6 January 2024.
This important resource enables us all to have an informed debate about tax and benefit polices.
Want to stay informed?
Subscribe for updates
—