All political parties seem obsessed by tax. Some want us to pay less, others none at all. Some people want progressive tax, others want a flat rate tax. Then you have complicated tax laws, from income tax to PAYE (pay-as-you-earn) to VAT to tax rebates and tax arrears. This post looks to simplify all the things you need to know, help you address the bits that are relevant to you, and bin the rest! See how to get out of debt (without more loans).
Income Tax is simply the amount you pay on your earnings, pensions, trust income, savings (and some state benefits), though most people on low incomes don’t pay any tax at all. There are some tax exemptions (like renting a room in your house or personal allowances when banking). You also pay national insurance and many rich people have managed to figure out how to not pay as much tax as they should, by employing clever accountants to ferry the money abroad. It’s estimated that if all the tax dodgers were caught and made to pay the money they should, this would at least equal the amount needed to cover many of the policies we need to pay for.
According to HMRC, around half of all tax evasion is due to fraud, and runs into around £4.6 billion. And yet recently, the government gave over £4 billion in subsidies to oil and gas companies, to pollute our planet (and send many people into fuel debt). Why? To make it easier to drill for oil.
There are many other forms of tax, including
- Capital Gains Tax (when you sell property, businesses or shares)
- Inheritance Tax (on estates and trusts inherited)
- VAT (for consumer goods from food to clothing)
Free Help for Tax Payers
- TaxAID is a charity offering free help for people on low incomes. Call the helpline if you’re stressing out about your tax, to find experts to help. Set up by tax professionals, it helps people to understand the bits of the tax system that apply, safely ignoring the confusing 98% that don’t. This means you pay only the tax you should and can get help, if things go wrong. Many people have been paying too much tax for years, simply because they did not understand the law, and did not know how to appeal against them.
- Tax Help for Older People also offers free help, this time to people on low incomes above a certain age. It has over 420 volunteers at their national call centre to help.
Simple & Affordable Tax Help
- Tax Scouts is a flat-fee service (just over £100) to fill in a few questions, send all your paperwork and have a qualified tax accountant sort all your headaches out for you, then send it to HRMC. Sorted!
- Osome is a service for small business to manage taxes and VAT, with a dedicated accountant and automated software to reconcile your payments. Transition is seamless, and the cloud-based software ensures reports are mistake-free, filed with the government accurately and on time, to avoid nasty fines.
- GoSimpleTax is a simple-to-use app to create and send invoices with automatic invoice numbers, ability to track if invoices are paid or not (and send reminders for overdue ones) and a simple system to track income and expenses, and get paid faster. The app automatically updates your tax return, within the account.
When Tax Becomes Politics
Tax is a real political backbone of most party policy. It’s strange that despite many top Catholic MPs trying to have rich people not paying their taxes, Jesus Christ was in favour of paying taxes to those who would be servants to take care of our lands. How times change. Whatever your religion or politics, not paying taxes when those at the bottom of society go without, is not very Christian. Liz Truss found to her cost that if you don’t have the self-awareness (no matter if due to some well-meaning philosophy) that cutting taxes for the super-rich in a time of huge hardship for the rest of society, did not bode well for her legacy.
Of course, many people would like to know where their taxes go. Many people oppose paying taxes used to make weapons, and many people won’t wish to pay taxes on things they don’t agree with like factory-farmed meat or rainforest destruction. American eco-warrior Rob Greenfield famously earns what he needs and then gives all his other money away, so he has no part in paying taxes for things he doesn’t agree with.
I don’t pay federal income taxes, but I will contribute far more to the betterment of society, than most will through paying taxes. I have alternatively redistributed my funds at around 70% tax since 2015. I refuse to let my work, resources and funds be used to act in injustice, inequity and destruction. Under good consciousness, I have removed myself from the broken parts of our system, and replaced them with systems that create equity and justice, and regenerate our Earth and humanity. Rob Greenfield
Due to all the talk and complications of tax in politics, many now advocate a flat rate tax system as best. This means that everyone pays the same amount of tax, no matter what they earn (still not paying tax for those on low incomes). This means that the time and money used to collect and sort tax (and find tax cheats) is saved, and the huge savings can be passed on to do something better. Then those who earn a lot but don’t like paying tax (like Conservatives) are happy, and those at the lower income end are also happy, as the tax cheats get caught, and they also pay low tax. Although it’s not as fair as high-income people paying more tax, the right-wing will always argue that this is not good for entrepreneurs. Get rid of tiered tax, and you flatten all political arguments, stop tax dodgers and get rid of likely half of the economists at Whitehall, creating tax codes. It’s got to be better! Other taxes (like Capital Gains) are then eliminated, simplifying the system further still.
Experts propose in the UK for a 15% tax rate, with a personal tax-free allowance of around £20,000 (far more than the US flat tax rate which hovers around 5%). Estonia replaced three tax rates to a rate of 26% and it was so successful, that many other Eastern European countries followed suit.
Music Break: Taxman
This is one of the few songs written by guitarist George Harrison of The Beatles. The other well-known one he wrote was ‘Something’.