I’VE always thought it strange that after all the extraordinary technological advances in the world, our tax rate still increases, as does inflation and so interest rates.
Surely with such speed of advances, we wouldn’t need as much, and services would be cheaper and quicker?
Remember when they first introduced an answer machine for your home phone. What did we do before then?
All meetings were face to face and lengthy, as you didn’t have emails to cover matters before, instead, wading through countless faxes. A letter would take days of delivered at all.
You had to travel to every meeting costing time and fuel, and yet, inflation is soaring and taxes rising. Help me make that make sense.
- Making good financial decisions
- There's tax and then there's inheritance tax
- Should you be worried about a recession?
Forget the direct taxation, also consider the indirect taxation: Remember when you didn’t have to pay for education, for university fees, when you didn’t have to pay for parking in a town, or when you didn’t have to pay for parking to visit your dying parent in a hospital.
Just where is the money going?
No surprise then that we now have the highest tax burden relative to our economy since the 1950s. The previous high was back when I was a mere one year old in 1969. It was 35.1 per cent of GDP (the economy).
When George Osborne was chancellor in 2010, the tax bill was 32.8 per cent of GDP. It is now 36.8 per cent, expecting to rise to 37.7 per cent. In 1953, the actual tax bill per head was £2,000. Today its £13,000.
You can sit over your cornflakes and decide where all that money is going and where the current value is being added from it.
I’m a little bewildered, but as the CEO of this company, if I stepped into that public sector role as a CEO of the country, I’d have my accountants in for a long chat.
Taxes in the UK: You have your income tax and national insurance as your base taxes, then you have value added tax where tax is charged… and no value added.
A list of other direct taxes are: Capital Gains Tax; Insurance Premium Tax; Stamp Duty and Land Taxes; Excise Duties; Dividend Tax; internal tax on the growth of investments; council tax; vehicle tax; taxes on flights (airline passenger duty); fuel tax (this is a flat levy of 52.95p per litre and then VAT on top of that – talk about kicking a man when they are down.
This tax used to be a higher percentage at 74 per cent in 2016, but it has fallen as a percentage to 53.75per cent.
Before you think they have gone soft, it’s just that fuel prices have risen extortionately, and so a flat rate looks smaller against a higher base price.
For example, a 52.9p flat rate tax against a price today of 143p per litre, looks very different to a 52.9p flat rate on a 103.9 litre. It’s just that the oil companies are enjoying themselves more, but there has been no softening of the tax - then you pay VAT on your accountants bill to calculate your tax. I love it.
After all of that, whilst driven to an early taxed grave, there is Inheritance Tax – a whopping 40 per cent of your estate if you haven’t managed to protect it.
Now if you happen to have accounts offshore as per the Panama papers, and a string of companies across the world where you offset their losses against your UK gains, much of what I have said above isn’t really making sense right now.
That’s the great ‘non – sense’ of taxation – allowing a company to benefit from UK revenue and spending, while allowing overseas lack of spending in other countries to take down the tax those companies should pay to help with UK infrastructure, including the lady looking for her cancer treatment (I say that on the eve of my late mother’s 20th anniversary).
Make it make sense. Make it make sense that Amazon can do all that and the shop on the high street has all the local taxation costs (business rates).
Meanwhile, with a pre-tax profit of £222m, Amazon’s main UK division will pay no tax due to a government super deduction scheme introduced by Rishi Sunak.
There is a fair level of tax we should all pay including corporations, but each and every one of you need not pay more than you are effectively due, so take that advice.
Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial question call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit wwfp.net