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.”
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.