Children and young people to carry greater tax burden
Children born now will have to pay considerably more in taxes than they'll receive in benefits, compared with previous generations, new research has revealed.
A report by the National Institute of Economic and Social Research (NIECR) has found the next generation will pay £70,000 more in taxes over their lifetime than they will receive in services and benefits.
On the other hand, those people who are over 65 now have received £220,000 more in benefits and services than they have paid in taxes.
The need for a rise
The NIECR says taxes need to rise to 6% of GDP now in order to help future generations and to fund current pensions and services.
The report claims that "a broad tax rate like employers' National Insurance contributions or the standard rate of income tax" should be considered when looking at an increase.
The report states: "There is a past history of pay-as-you-go benefits which has allowed earlier generations to receive more from the state than they have contributed over their life-times and it is inevitable that there is now a net contribution which has to be paid".
The NIECR claims new tax rises need to be implemented "as soon as possible".
Invented by a Frenchman in 1954 and ironically introduced in the UK on 1 April 1973, VAT is an indirect tax levied on the value added in the production of goods and services, from primary production to final consumption and is paid by the buyer. Its levying is complex, with a number of exemptions and exclusions. For example, in the UK, VAT is payable on chocolate-covered biscuits, but not on chocolate-covered cakes and the non-VAT status of McVitie’s Jaffa Cakes was challenged in a UK court case to determine whether Jaffa Cake was a cake or a biscuit. The judge ruled that the Jaffa Cake is a cake, McVitie’s won the case and VAT is not paid on Jaffa Cakes in the UK.
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
The total money value of all the finished goods and services produced in an economy in one year. It includes all consumer and government consumption, government spending and borrowing, investments and exports (minus imports) and is taken as a guide to a nation’s economic health and financial well being. However, some economists feel GDP is inaccurate because it fails to measure the changes in a nation's standard of living, unpaid labour, savings and inflationary price changes (such as housing booms and stockmarket increases).
Capital gains tax
If you buy an asset – shares, a second home, arts and antiques – and then sell it at a later date and make a profit, that profit could be subject to CGT. You don’t pay CGT on selling your main home (which is why MPs “flipped” theirs so regularly) or any securities sheltered in an ISA. Individuals get an annual CGT allowance (£10,600 in 2010/2011) but if you have substantial assets it’s worth paying an accountant to sort it for you.