A new report calling for family tax reform has been welcomed by CARE, which has spearheaded calls for change for more than a decade.

The report, by the Centre for Policy Studies and Conservative Growth Group, makes recommendations on how to put “fairness for families” at the heart of the tax system. The CPS states:

“Couples with the same overall income can end up paying dramatically different amounts of tax depending on how earnings are divided between them. A couple earning £60,000 with two children will pay over £7,000 more as a single earner than if both adults earned £30,000 each.”

It adds: “The British tax system is also much less kind to families than other comparable countries. At the average wage, a single-earner married couple with two children will pay more tax here than in France, Germany, or the US – and more than the OECD average".

Ross Hendry, CEO of CARE, comments:

“At CARE, we have expressed concern that inequality in the tax system is hurting families for many years. The new report by the CPS and Conservative Growth Groups makes several helpful recommendations, and we’d encourage ministers to carefully consider them.

“COVID-19 has faded from the headlines, but our country is facing a new, fiscal pandemic. Across the UK, household bills are high. Families are feeling the strain and facing desperate choices. With reform of income tax rules, Ministers can make a difference.

“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. Families in poverty are paying income tax. Families in the bottom half of income distribution pay tax at the higher rate.

“This unfairness must be addressed. A shift in Government policy is needed. We recognise that the changes called for will be challenging to enact, but as a society we should always strive for what is fair, even if it’s difficult to achieve.

Campaign for reform

CARE has called for reform of income tax rules to benefit families for more than a decade, making representations to successive Conservative administrations.

The charity’s most-recent report, with tax policy consultants Tax & the Family, argues that existing rules governing income tax and national insurance contributions are inherently unfair. It 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 report also notes that the UK is out-of-step with other Western nations that recognise the pressures families face. It adds: “Comparing the UK with individual countries, the UK income tax burden is greater than the figures for France, Germany and the US.”

CARE and Tax & the Family have called 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 also 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

ENDS

Notes for Editors

Christian Action Research and Education (CARE) provides analysis of social policy from a Christian perspective. For more information or to request an interview with one of CARE’s policy experts, contact press@care.org.uk