Tories propose tax system shake-up
The Conservative Party has promised to bring an end to stealth taxes in a major shake-up of the UK taxation system.
Shadow chancellor George Osborne has outlined a series of reform measures that his party will bring into play should it be elected to power. These include the creation of a department to research tax simplification, as well as longer consultation periods on changes to taxation.
Speaking to the Institute of Chartered Accountants of England and Wales, Osborne said there was an “urgent” need for reform.
A new Office of Tax Simplification, made up of Treasury officials, academics and members of the profession, would examine the existing tax code and make proposals for simplification.
In addition, a Tory government would publish proposed tax changes at least six months before they were introduced.
Osborne said this would mean that there would be no more stealth taxes and it would bring an end to “bad news” being buried in the small print.
He said the current government’s repeated u-turns and series of stealth taxes had collectively undermined the UK's reputation as a stable environment for companies and individuals.
“The reasons for these failures are partly political - Budgets and pre-Budgets have been driven by the shortest of short-term tactical considerations with little apparent regard for the longer term economic consequences. Combined with an obsessive desire to raise taxes by stealth, this has progressively undermined public trust in the tax system,” Osborne added.
Meanwhile, a new report shows increases in taxation have left the majority of people resentful about the current level of the tax burden in the UK.
The report by Friends Provident shows that 81% of people feel they pay more in tax now than they did five years ago, with 73% of them resenting this. Around 43% say stealth taxes are responsible for the increase in their tax burden, while nearly a quarter put it down to changes in income tax brackets.
Council tax increases have hit the majority of people the hardest, followed by levies on motorists such as fuel duty and road tax.
Peter Timberlake, head of public relations at Friends Provident, said that despite people feeling resentful about the level of taxes in the UK, not enough people take steps to reduce their tax burden.
"It is fair to say that the UK is feeling taxed by overtaxation and we would urge people to review their finances to see if they can help better manage the tax they pay," he added.
A recent Moneywise.co.uk poll found that 82% of users have seen their tax burden increase over the past five years. No one reported a fall in the amount of tax they are required to pay.
One user, karlcw, said: “For nearly 10 years we've had the fastest rising tax rates in Europe. Our corporate taxation is now higher than many European countries and this is causing businesses to move offshore.”
Another, KRHSMith, added: “I have some reasons to move house now. However the tax burden of moving with stamp duty are such that I'm likely to stay put.”
Used by an employer or pension provider to calculate the amount of tax to deduct from pay or pension. A tax code is usually made up of several numbers followed by a letter. If you replace the letter in your tax code with ‘9’ you will get the total amount of income you can earn in a year before paying tax, for example 747L would mean a person could earn up to £7,479 before paying tax. The wrong tax code could mean a person ends up paying too much or too little tax.
A hugely unpopular tax paid on property and share purchases. Stamp duty on property is levied at 1% for purchases over £125,000 (£250,000 for first-time buyers) which then moves up at a tiered rate. For property between £125k and £250k you pay 1%, then 3% from £250k up to £500k and then 4% from £500k to £1m and then 5% for properties over £1m. But unlike income tax, which is “tiered” and different rates kick in at different levels, stamp duty is a “slab” tax where you pay the rate on the whole purchase price of the property. On shares, stamp duty is charged at a flat rate of 0.5% on all share purchases. Figures correct as of May 2011.
The practice of locating your financial affairs (banking, savings, investments) in a country other than the one you’re a citizen of, usually a low-tax jurisdiction. The appeal of offshore is it offers the potential for tax efficiency, the convenience of easy international access and a safe haven for your money. However, offshore is governed by complex, ever-changing rules (such as 2005’s European Union Savings Directive) and, as such, is the exclusive province of the wealthy and high-net-worth individuals.