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Less tax for the poor, maybe?

Less tax for all?

Less tax for all?

No rises in income tax rates, value added tax (VAT) or national insurance for the next five years.

Well, that’s the headline. What was an election gimmick, has now been delivered by Her Majesty in her address from the throne. It will be law.

Great, less tax all round, we’ll all be better off. But some obviously will be better than others.

Now who, that is the question? The poor? Well certainly the Queen’s speech promised to help the less well off.

She even went so far as to include a promise of a new law  to ensure that people working 30 hours a week on the national minimum wage do not pay income tax.  This on top of the five year freeze on tax rates.

The government said “As part of our long-term plan to back working people and make work pay, the government is determined to reward work by letting people keep even more of the money they earn. The government has already committed to raising the income tax personal allowance to £12,500 by 2020.

Today the government is going further in its actions to offer more security to working people by confirming that legislation will be brought forward to ensure that future increases to the Income Tax personal allowance reflect changes to the National Minimum Wage.

This will mean that people working 30 hours a week on the minimum wage will not pay any Income Tax.”

The winners

So there you have it, no tax when your on minimum wage.

True only if you are on 30 hours a week or less. But most working weeks are considerably longer. The average in UK is just over 39 hours a week.

The minimum wage rate from October 2015 is £6.70 per hour for adults. So anyone working a 37 hours a week would earn about £13,000 a year, and would still be liable to income tax.

As for the higher personal allowances it will help the middle-classes. But the less well off then 44% of these are on such low incomes they don’t pay any income tax so are no better off,

What hits the poor is a tax they cannot avoid VAT. The VAT rate of 20% is the same for the millionaire as it is for the pauper.

According to the government’s own statistics the poorest 10% of households pay nearly 47% of their gross income in direct and indirect taxes, while the richest 10% pay 35% of their income in taxes.

The government are talking a fine game for the working poor.  But it’s the rich that are being looked after. It was always thus.

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3 Responses to “Less tax for the poor, maybe?”

  1. Karen says:

    You claim the poor cannot escape VAT at 20%. Why not? The 20% band for VAT only applies to non-essential items, luxury items if you will including boats, booze and cigarettes.

    Why is it that so many of today’s ‘poor’ have so much free cash to spend on luxury items (after having managed to pay for energy, food, the kids clothing and so on, not one item of which is rated at 20% for VAT)?

    How rich do you have to be these days before they aren’t allowed to call themselves poor?

  2. iestyn says:

    There’s another “tax” that hit’s the poor, and that’s National Insurance. They are constantly harping on about “not paying Income Tax”, but they rarley mention that NI still kicks in at a far lower rate – £672 a month this year, and it’s a 12% charge.

    And there’s another little thing that they don’t mention: Once you’re paying your 40% rate, your NI drops to 2%.

    In other words, our great “progressive” tax system charges 12% to low earners, 32% to low to middle earners, and 42% to higher earners, and it’s only the exact point that the 32% kicks in that they ever change, because its the tax that everyone thinks of when they are earning…

    BTW VAT is included on all luxury items, like fuel for your car, child seats, adult clothing, so unless it’s accepted that poor people should walk everywhere naked, then Karen’s “booze, boats and ciggies” line is not 100% accurate.

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