Resources

For many years, CARE has been at the forefront of research on how families fare in the UK tax and benefits system, both domestically and internationally. Below you will find our latest research, as well as previous reports and further information.

The Taxation of Families - International Comparisons 2017

Independent Taxation – 25 years on: does it meet today’s needs?

Previous reports

Couple Penalty

Further Information and Reading

 

 

The Taxation of families - International Comparisons 2017

Our latest tax report examines how UK families fare in comparison with their counterparts from the Organisation of Economic Cooperation and Development (OECD) with reard to the overall tax burdens, income tax rates and Effective Marginal Tax Rates they face.

Independent Taxation – 25 years on: does it meet today’s needs?

This report by CARE fiscal policy consultants Don Draper and Leonard Beighton examines whether Independent Taxation, (whereby individuals are taxed solely based on their income and whether they are married or have children), introduced by the then Chancellor, Lord Lawson in 1990, has achieved the objectives originally set out for it. These objectives were:

- To give married women the same opportunity for privacy and independence in tax matters as their husbands.
- To remove discrimination against marriage and the family.
- To be able to raise tax thresholds in a cost-effective way, so as to reduce the tax burden on families with low incomes.

Key headlines

The report finds that based on these objectives, the introduction of Independent Taxation has been a failure, and has had a negative effect on families with children in particular

In 1990 typical families faced an Effective Marginal Tax Rate (EMTR) of 34%. They now face a EMTR of 73%; this will increase to 76.2% when families are switched over to Universal Credit. This means that for every extra £1 earned (through overtime for example) only 27p (now) and 23.8p (under Universal Credit) will come into the household.

The higher rate income tax threshold is also lower in real terms than it was in 1990, and many families, particularly one-earner families, who would have paid only basic rate tax in 1990, pay higher rate tax now. The threshold is now so low that a family with three or more children may be paying higher rate tax, even with a disposable income below the level regarded by the Joseph Rowntree Foundation as an acceptable minimum level of income.

The Solution

The report argues that a fully transferable allowance for married couples should be implemented. It also suggests that the Additional Persons Allowance (APA) and Married Couples Allowance (MCA) could be reintroduced, (the latter helping dual earner couples who have been less disadvantaged by the move to independent taxation.)

In addition to the above tax breaks for married couples, the Government could also consider introducing optional joint taxation for couples, or moving support for families from the benefits system back into the UK tax systems.

The one thing we must not do is stay where we are.

 

Previous year’s papers on UK taxation rates and how they affect married couples, can be downloaded in PDF format using the links below:

2016/17 Report

2015/16 Report

2014/15 Report

2012/13 Report

2011/12 Report

2010/11 Report 

2009/10 Report 

2008/9 Report

2007/8 Report

2006/7 Report

 

Couple Penalty

From 2006 to 2009, CARE provided an annual assessment of the ‘Couple Penalty’ – the unwelcome fiscal incentive for couples with young children, on low to modest incomes, to live apart, resulting from the tax credit and wider benefits system.

Over a period of three financial years, CARE Fiscal Policy consultant, Don Draper, conducted an annual review of the couple penalty. Sadly the numbers of families negatively affected is increasing. The last thing a country wrestling with the unfortunate consequences of family breakdown needs is the creation of fiscal incentives for parents to live apart. 

From the year 2009/10 onwards, the analysis of the couple penalty has been incorporated into The Taxation of Families reports (see above).

To access previous reviews, please see below:

2007/8 Review

 

Marriage Support

CARE’s Director of Parliamentary Affairs, Dr Dan Boucher, provides an overview of the erosion of government’s use of taxpayer’s money to support marriage. The report was originally published in 2008.

 

Further Information and Reading

The Case for Transferable Allowances for Married Couples: Recognising the public policy benefits of marriage (produced March 2013)

The Case for Transferable Allowances for Married Couples: The fiscal fairness perspective (produced March 2013)

Progressive Fiscal Policy CARE Pre-Budget Briefing (produced ahead of the March 2012 Budget)

The Prime Minister and Conservatives on recognising marriage in the tax system

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