Taxation of Families in 2021

Tax and The Family together with the charity CARE published on 30th March their annual report on the taxation of families in the UK and other OECD countries. The report was launched at a Parliamentary event chaired by Miriam Cates the Member for Penistone and Stocksbridge. The report calls for fairer taxation - not necessarily lower taxation. The tax burden in the UK is rising to its highest level since the 1940s. Figures released by the Treasury show that the tax burden on incomes is likely to continue increase for the rest this Parliament .Inflation is at an historic high. Household budgets are coming under extreme pressure. It has never been more necessary, the authors say, for tax burden to be shared fairly.

Income tax accounts for 26% of all tax revenue, and National Insurance Contributions which is also a tax on income, a further 18%. These two taxes on income account for almost half of total taxation. If thetas burden is to be shared fairly fairly income tax needs to change The report argues that income tax needs to be related to how well off we are. At present it is based almost entirely on individual income whereas how well off people are depends on household income and family size. This is what happens in Germany, France and the US.

Government figures reveal that a couple with two children needs 2.4 times as much disposable income to have the same standard of livings a single adult. Larger families need more. In this country in 2021 even after benefits and housing costs are taken into account a couple with two children and a median household income paid 4 times as much income tax as a single adult with a median income. Even two income couples can be paying almost twice as much. Families in poverty are paying income tax. This happens because since 1990 income tax has been based on individual income.

After the report had been finished the Treasury released figures which showed that to have an average standard of living 2 adults and 2 children needed a gross income of of over £50,000 whereas a single adult with no children needed only £22,000.

There is a need for structural reform. This cannot be achieved overnight - it may take five years.. But there are changes that can be made within the present system which would make income tax slightly fairer. Is the Treasury listening?

To read the full report click here.

To see the slides used at the presentation click here.

To read Don Draper’s analysis of the challenge we face click here.