TEN YEARS OF GIVE AND TAKE

 AND TAKE AGAIN!

The final paragraph of Gordon Brown’s latest budget statement may have grabbed the headlines with the announcement of a 2p cut in the standard rate of income tax from 22p to 20p but the truth is that most UK households are paying almost twice as much tax as ten years ago when Labour came to power.

  

 

 

Accountants, Grant Thornton, estimate that personal tax take has risen from £215 billion in 96/97 to £399 billion in 06/07 – mainly through the imposition of “stealth” taxes.

 

The scrapping of the starting rate tax band of 10% seriously affects people on modest incomes and even the impact of the standard rate reduction on higher earners means that anyone earning over £28,000 is still paying more than a decade ago, according to estimates by the Institute of Fiscal Studies. 

 

Whilst the average price of a UK property has nearly trebled to £192,000 in the past decade, according to the Halifax, it has also generated a windfall for the government.  Stamp Duty revenue has increased six-fold to £4.6 billion in 2005/06.

 

The failure to increase income tax thresholds in line with earnings over the last ten years means that more than one million people pay income tax at the top rate of 40%.  Similarly, the level at which inheritance tax (IHT) is applied has in no way kept pace with house price inflation.  What was initially designed as a tax on the very wealthy now applies to over one in ten properties.  Even with the rate starting at £300,000 in 2007/08, it should be now have risen to around £500,000 to be in line with property prices.  It is estimated that the Chancellor’s IHT take has more than doubled over the decade to £3.5 billion in 2005/06.

 

This ever-increasing tax burden means it is more important than ever to have specialist tax planning advice. 

 

With the complexities of the budget, it does mean that some tax loopholes have been closed, such as the use of insurance bonds to avoid tax on income from savings.  Equally, people who have bought overseas holiday homes through companies will enjoy lower income tax charges following changes announced in the budget.  Other sensible options too can be considered.

 

At Sandersons, we have been developing our tax expertise for over twenty years, with particular emphasis on:

  • Inheritance Tax planning

  • Capital Gains Tax

  • Income Tax Planning

  • Tax planning through trusts

  • Advice on foreign jurisdictions

  • Tax emigration and offshore tax planning.

If you have a tax problem or would like to make sure that your financial planning is up to date, Sandersons are happy to help.  You can contact Geraldine Martin (who is a specialist in Inheritance Tax planning) and she will ensure that the matter is dealt with by the right person. 

 

Geraldine Martin

Sandersons Solicitors

The Hall, Lairgate,

Beverley HU17 8HL

Tel: 01482 324662

Fax: 01482 860118

Email: enquiries@sandersonssolicitors.co.uk

 

Source:  The Journal, May 2007