14 October 2014
October sees the issue of the first personalised tax summaries to individual taxpayers.
The summaries show taxable income, tax rates used and income tax and National Insurance (NI) payable for a particular tax year. Many individuals who have applied for loans and mortgages will have obtained a similar statement from HMRC to prove their income to prospective lenders in the form of an SA302.
The new summary goes one step further in showing where notionally the tax and NI collected has been spent. Expenditure has been divided into 15 categories, from the big ticket items, such as Welfare and Health, via the middle rank of Transport and Government Administration, down to the less costly areas of Contributions to the EU Budget and Overseas Aid.
In the examples that have been published, in 2013-14 an average earner on £23,000 per annum, paid tax and NI of £4,540, of which £1,024 went on Welfare and £25 on Overseas Aid. Similar figures for a high earner on £60,000 per annum were £18,240 for tax and NI, of which £4,111 and £101 went on Welfare and Overseas Aid respectively.
Whilst it may be useful for taxpayers to have a ready to hand summary of their tax positions, especially those looking to borrow, maybe the real value is in encouraging taxpayers to be aware of where their money is being spent by Government. There is also the danger that, like the annual breakdown of expenditure that usually accompanies Council Tax bills, the spending summary will go largely disregarded. However, this may be the first unsteady step on the road to hypothecation of tax, which could end with us all having a say where, at least part of, our tax is spent.
More prosaically, away from future democratic developments, the summary may give employed higher earning taxpayers a wake-up call as to how much tax they are paying each year. This is the sort of realisation that self-employed taxpayers get every January and July, when tax payments become due. It may just cause these taxpayers to start to think more carefully about the tax that they pay and start to wonder about ways in which this burden may be lessened.
If you’re concerned about the amount of tax you’re paying and would like to find out about ways in which your tax bill can be reduced, please contact one of our tax advisers at your nearest location, or complete our contact form.