The tax proposals being issued by the coalition government seem terribly unfair. Whilst multi-billion corporations are dodging hefty taxes through tax avoidance schemes, the UK´s low and middle income earners are being targeted to pay more tax. Meanwhile, top earners taking home £150,000 or more have been given a five per cent tax relief.
In the last month, it has been reported by mainstream media that casino´s, Premier League football clubs, Facebook and Amazon have all been accused of avoiding paying the full amount of tax they are liable to pay. Thus far the government has done nothing to close the loopholes on tax havens in off-shore accounts, but didn´t think twice about taxing low income earners and people receiving unemployment benefit.
Not only is the Tory government allowing multi-billion pound businesses to save hundreds of thousands in taxes, they are also protecting the income of Britain´s highest earners by slashing the tax rates from 50% to 45%. The relaxed tax liabilities for top earners will start from 6 April 2013. Although there are no other changes in income tax, other tax policies have been targeted – most of which are a detriment to the UK´s lower income earners.
Reduction in child benefit
By announcing a reduction in child benefits, Treasury Chancellor, George Osborne will not have won many admirers. The benefit cuts which came into play in mid-January has left almost a million middle income families with children under the age of 16, in a difficult financial situation. The new rules are that if either parent takes home £50,000 you will lose part of your benefit which increases progressively the more you earn. If either one of the couple earns more than £60,000 child benefit is stopped altogether.
Couples that fall into the £50,000-£60,000 bracket have the option to turn down child benefit altogether and not risk having to pay taxes back on income at a later date. Families that decide to continue receiving child benefit will have to complete a Self Assessment Tax Return form before 31st January each year. Failure to do so will incur a penalty find of at least £100. The amount payable in fines could be double the tax that you owe.
The average rate of child benefit is currently £1,752 a year per child. Middle income couples will therefore lose £1,056 a year. This adds a further 10 per cent to their marginal tax rate. Therefore a family five will have to pay 66.06p in taxes for every one pound they earn – a tax loss of almost 70 per cent!
The injustice between the top earners and the middle income earners does not seem fair – especially for couples with large families. It could mean stay-at-home mother´s returning to work, but then they have to pay phenomenal fees in child care. To avoid hefty tax charges middle income families are advise to either forfeit child care or invest more in a pension fund to bring your take home income below the £50,000 threshold.
For directors of companies that earn over £150,000, the solution to avoid tax for 2011/2012 is simple – don´t pay yourself any dividends this year and shift it into the tax year for 2012/2013 where you can enjoy the benefits of a reduced tax rate. If you are affected by the new tax rules and want advice on how to protect your income call Taxaccolega now on 08000 235 234 or email email@example.com.