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Overhaul 'individualised' tax system to help struggling families weather ‘fiscal pandemic’

Marriage and Family
30 March 2022
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Press Release: CARE and Tax & the Family

Experts have urged the UK Government to reform Britain’s "individualised" tax system to assist struggling families in a coming “fiscal pandemic”.

A new report by CARE and tax policy consultants Tax & the Family argues that existing rules governing income tax and national insurance contributions are inherently unfair as they fail to recognise that households with children have far less disposable income.

The report states:

"Because income tax and NICs are both based on individual income, the amount of tax paid by families – households with children – bears little relationship to how well off they are. Families in poverty pay income tax, often significant amounts. This problem, long ignored by successive governments and others, should be addressed now.”

“The failure of the income tax system to take account of household size and circumstances results in taxpayers with children paying a lot more tax than taxpayers without children who have the same standard of living, some families with household income below the poverty line paying income tax, and families in the worse off half of the population paying higher rate tax and losing child benefit”.

The UK is out-of-step with other Western nations that recognise the pressures families face. The report adds: “Comparing the UK with individual countries, the UK income tax burden is greater than the figures for France, Germany and the US.”

Call to action

CARE and Tax & the Family call for a significant “shift in Government policy”, saying: “Income tax should be based on household income, not individual income”. Recognising that such a change cannot be “achieved overnight”, the groups call for several short-term changes to ease pressure on struggling homes. They recommend that:

  • The threshold for the High-Income Child Benefit Charge be increased
  • The reintroduction of child tax allowances be explored
  • The marriage allowance be increased, widened, and a marginal relief added
  • The restriction of child credits to two children in a family be repealed
  • Child benefit be increased to restore its value in real terms

Ross Hendry, CEO of CARE, comments:

Ross Hendry

“Our country is facing a fiscal pandemic. Across the UK, household bills are rising. Many families are already feeling the strain of choosing between eating or heating. It is therefore timely that our annual ‘Tax and the Family’ report is published.

“The UK tax system fails to treat families fairly. The amount of tax that a family pays in the UK bears little relationship to how well off that household is. It is deeply concerning that any family finding themselves in poverty should pay any income tax, it is shocking that some families in the bottom half of income distribution pay tax at the higher rate. This unfairness in the tax system must be addressed.

Mr Hendry adds:

“This report highlights that a shift in Government policy is needed. What the UK needs is a tax system that is fair, and which does not trap people in poverty. We recognise that the change called for in this report will come at a cost and will be complex, but as a society we should always strive for what is fair, even if it’s difficult to achieve.

“Reform of the income tax system is only one way we can help families, but it could be an important step in ensuring that people across the UK are treated with fairness, at the very least, this is a debate that is worth having.”

ENDS

Read the Report

The Taxation of UK Families 2021 Including International Comparisons for 2020

About CARE

Christian Action Research and Education (CARE) provides analysis of social policy from a Christian perspective. It has produced an annual report on taxation for 14 years.

About Tax & the Family

Tax & the Family consists of independent consultants Leonard Beighton, Don Draper, and Alistair Pearson.

Leonard Beighton spent 37 years in the Inland Revenue, ending in 1994 as Deputy Chairman of the Board. In 2011 he was made an Honorary Fellow of the Chartered Institute of Taxation.

Don Draper worked on tax policy in the Inland Revenue for over 20 years before moving to PricewaterhouseCoopers. In retirement he has taken a special interest in the taxation of the family.

Leonard and Don are trustees of Tax and the Family Charitable Trust. Alistair Pearson is a management consultant with a concern for fairness in public policy.

ENDS

For more information or to request an interview, contact Jamie Gillies | jamie.gillies@care.org.uk

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