--------------
Economics - Stealth Taxes Income taxes are at their lowest level in history, but yet we pay more tax than ever before. Why? 'Stealth' taxes, that’s why. There are good recent examples in which the tax take has been increased without the taxpayer being aware of it. The most apparent is the phasing out of mortgage interest relief (MIRAS), the removal of married couples’ allowance and the removal of the ability of non-taxpayers to reclaim the tax credit on share dividends. Indeed, two good examples of stealth taxation - personal allowances and the higher-rate tax threshold - were both mentioned in the Pre-Budget Report for the wrong reasons. Both are only due to increase in April 2002 by the rate of inflation (1.7 per cent). Yet earnings are rising at the much faster rate of 4.5 per cent. This means that more than 2.7 million of the 28 million taxpayers are in the higher rate bracket in which earnings above £33,935 are taxed at 40 per cent - 1 million more than 10 years ago. The impact of stealth taxation is borne out by the statistics, which show that, although rates of tax have reduced, the government expects to increase its overall tax take in 2001. It has been reported that the Tories collected £99.1 billion in income tax in their last year in power, and that this year Gordon Brown expects to collect £145 billion. This represents a whacking 45 per cent increase in the income tax take, which is due to the impact of more people now being subject to higher-rate tax and more cash being raised by stealth taxation. Here are just some of the stealth taxes that have been implemented - or that we know will be implemented - in the future. * The gradual reduction of the value - and now the complete removal - of the married couple’s allowance for couples aged under age 65. * The gradual reduction - and now complete removal of mortgage interest tax relief at source (MIRAS). * The removal of the age-related married couple’s allowance, where neither of the married couple were aged at least 65 on 5 April 2000. * The removal of the ability of pension funds to recover the tax credit on UK dividend income – which works like compound interest in reverse - meaning that pension contributions will need to be increased to provide the same level of benefits. * The inability for non-taxpayers to recover the 10 per cent tax credit on UK share dividends. * The reduction in the level of tax-free savings that can be made each year. Under PEPs/TESSA it was £12,000,(£9,000 for PEPs and £3,000 for the first year of a TESSA). Under the ISA it is £7,000. * The failure of the higher-rate tax threshold to increase at the same rate as earnings. Since 1988, this threshold has increased by just 52 per cent to £29,400 while average earnings have increased by 84 per cent. Since 1997, approximately 200,000 more people have to pay tax at the top rate. * The failure of the nil-rate inheritance tax band to increase by the rate of inflation. This means more inheritance tax will become payable - especially on the death of property owners. * The inability for PEPs and ISAs to recover the tax credit on UK dividends after 5 April 2004.
Economics - Stealth Taxes Income taxes are at their lowest level in history, but yet we pay more tax than ever before. Why? 'Stealth' taxes, that’s why. There are good recent examples in which the tax take has been increased without the taxpayer being aware of it. The most apparent is the phasing out of mortgage interest relief (MIRAS), the removal of married couples’ allowance and the removal of the ability of non-taxpayers to reclaim the tax credit on share dividends. Indeed, two good examples of stealth taxation - personal allowances and the higher-rate tax threshold - were both mentioned in the Pre-Budget Report for the wrong reasons. Both are only due to increase in April 2002 by the rate of inflation (1.7 per cent). Yet earnings are rising at the much faster rate of 4.5 per cent. This means that more than 2.7 million of the 28 million taxpayers are in the higher rate bracket in which earnings above £33,935 are taxed at 40 per cent - 1 million more than 10 years ago. The impact of stealth taxation is borne out by the statistics, which show that, although rates of tax have reduced, the government expects to increase its overall tax take in 2001. It has been reported that the Tories collected £99.1 billion in income tax in their last year in power, and that this year Gordon Brown expects to collect £145 billion. This represents a whacking 45 per cent increase in the income tax take, which is due to the impact of more people now being subject to higher-rate tax and more cash being raised by stealth taxation. Here are just some of the stealth taxes that have been implemented - or that we know will be implemented - in the future.
* The gradual reduction of the value - and now the complete removal - of the married couple’s allowance for couples aged under age 65. * The gradual reduction - and now complete removal of mortgage interest tax relief at source (MIRAS). * The removal of the age-related married couple’s allowance, where neither of the married couple were aged at least 65 on 5 April 2000. * The removal of the ability of pension funds to recover the tax credit on UK dividend income – which works like compound interest in reverse - meaning that pension contributions will need to be increased to provide the same level of benefits. * The inability for non-taxpayers to recover the 10 per cent tax credit on UK share dividends. * The reduction in the level of tax-free savings that can be made each year. Under PEPs/TESSA it was £12,000,(£9,000 for PEPs and £3,000 for the first year of a TESSA). Under the ISA it is £7,000. * The failure of the higher-rate tax threshold to increase at the same rate as earnings. Since 1988, this threshold has increased by just 52 per cent to £29,400 while average earnings have increased by 84 per cent. Since 1997, approximately 200,000 more people have to pay tax at the top rate. * The failure of the nil-rate inheritance tax band to increase by the rate of inflation. This means more inheritance tax will become payable - especially on the death of property owners. * The inability for PEPs and ISAs to recover the tax credit on UK dividends after 5 April 2004.
Next >>>
Home These articles have been collected from various sources. If you are the copyright owner of any of them, contact us for either a credit and link to your site or removal of the article.
Home
These articles have been collected from various sources. If you are the copyright owner of any of them, contact us for either a credit and link to your site or removal of the article.
Economics
Transport
Law
Links
--------------