.. to think it's about time we taxed *household* income

[sussexman]

Reading today about the Labour proposal to tax the top 5% more heavily in order to pay for public services. It just strikes me as very old fashioned thinking to not take account of the fact that most households have 2 earners and that it might be better to tax the household income, not the individuals.

Using Labour's top 5% - take a couple each earning £45k - they'll pay 22k this year in tax and NI. If one of them was a SAHP and the other on 90k they'd pay 30k in tax and NI. It seems to me that we could fund better services, both more fairly and without clobering everyone so hard if the household income were taxed rather than the individuals.

None of this is intended as a plea for the rich - or indeed a suggestion as to what the rate should be - just a suggestion on a fairer tax system. AIBU?

Define household. What about people who work away 5/7 nights, are they a household? How do you track when people move in together? How long before they count as a household? Which household do children belong to when there are shared custody arrangements? What about houseshare 'households'?

I take your point but I just think it doesn't work.

No, no, no!!

Women fought hard for independent taxation.

I think it's fine how it is and don't agree with a household tax. How is that going to be worked out, married, living together, dc living at home earning?

It will be a lot more administration for all the changes of a household, divorces, dc moving out etc for this type of tax group.

Works very well here in the US and it's clearly defined. Its basically taking into account a couples income and their dependents (young and old) when calculating their obligation. Some people abuse the head of household filing category but in the grand scheme it's not a huge number of people.

How did you get to you calculations? By my calcareous a couple on £45k each would take home £5776 after tax and NI (£2883 each) where one £90k earner would take home £4998 per month. This is based on a tax code of 1150L

I do take your point but what about those in the other end of the scale so for example I earn about 13k part time so just above the tax threshold. DH earns just under a higher band of tax, to couple that together we would be in a much worse situation as a household.
I do see what you mean though it would work for some and maybe not that well for others

I don't think sussexman cares about that Iam

I think you're right but it might be difficult to administer.

In our household there are currently 4 people working full time and our combined household income is over £100 as a result. However, ds2 is on a gap year before going to uni in the autumn, and his pay is relatively low. He started work in September so didn't get taxed as he was below thd threshold. On a "tax the household" scheme he would presumably be taxed on that income. So I'm. Not sure how it would work for those cases.

But yes, in principle it would seem fairer as long as there was a scheme to fund childcare where both parents work and kids are young enough to need it. In your scenario of two people earning £45k each paying less tax than 1 worker on £90k plus sah parent , the first couple would have childcare costs if they had young children. So I think that needs to be factored in as well.

They don't want to encourage SAHPs. I am a SAHM, but I can understand the logic. If I worked, I would be paying tax. I would employ a nanny, who would pay tax. I would have more money to spend which would boost the businesses where I spent it, who would pay more tax and employ more people who paid tax.....etc etc.

Plus, as a pp said, it's hard to define a household. And taxation is generally looked at on an individual level.

Sod off. We had to fight to earn our own bloody money and pay our own taxes. How about lower the tax payment threshold and pay council tax per person instead of by the property value you know, which was actually fair.

The irony is that I see the independent taxation of women as being negative. Here in the US you can as a couple elect to file as married filing separately. That is true equality IMO.

I would simplify the US system and remove the married requirement for filing joint. It's not a bad framework but had been messed around with making it extremely cumbersome.

Two people earning have two sets of working costs and potentially childcare costs. I person working only has one commute cost and no childcare and the obvious solution that the other person could go earn up to their tax free allowance if they want, nothing is stopping them.

I earn my own money. Of course I want to be taxed as an individual, not as a wife!

@wando1986 you mean the Poll Tax? Which caused riots due to the way it favoured the rich?

Doesn't it put those in abusive relationships in a vulnerable position? It's tricky to sock money away for leaving if you have to be totally open about your earnings with your spouse.

I would favour married couples being able to combine their tax allowances like they used to be able to. Perhaps there would be a way of non-married couple doing it too but proof would be trickier.

jojo I guess there is a generation gap. I'm married and a very equal partner in my marriage. I make my own money, albeit a lot less than DH but still a bloody good wage by anyone's standards. We have 3DC. I like having a joint return because it's a very easy way for me to know exactly what DH is making and where assets are. If DH ever tried to leave me all I have to do is go through our tax returns to find out where all the assets are. The IRS and American government do not take kindly to anyone who hides income or foreign assets.

It would be better for me to be taxed individually as with DHs high income my income is effectively taxed 100% at the top rate. I consider that to be a great 'problem' to have and have told DH we are not messing around with our filing status to save a bit of money.

But two people working has more costs involved e.g. travel.

Gov doend't need to encourage people not to work.

No. Imagine the scenario of a person living with an abusive partner. The abusive partner is financially controlling and takes all of the money to pay the tax for them both. It's hard enough as it is now getting away from a financially controlling partner and that would make it even harder.

Disagree. Two workers means higher work costs to counterbalance the tax discrepancy. Also, as a one worker household you can increase your income of you need to. Two worker households are at their max. Plus as others have said, I am an independent person who should be taxed as such.

The US requires everyone to fill in a tax return every year and has a very complex tax code. In the UK everything is kept far simpler, so less tax money is wasted administrating taxes.
If you are not a higher tax payer a low/non tax payer can transfer some of their allowance to reduce your tax bill.

So I'm against this even though as a household we would probably benefit.

Agree greg yet wanttobe sees it the other way - she will know where all the assets are.

It just strikes me as very old fashioned thinking to not take account of the fact that most households have 2 earners

You must be young if you think it's old-fashioned. We only changed from doing like that in about 1989, I think.

A change back would make it less worthwhile for lower-earning spouses, usually women, to work. Even if they only have a minimum wage job, it would quite possibly be taxed at the higher rate.

When I'm Prime Minister, we will go even more the other way, benefits will also be done on an individual basis, not household. That will mean adults will be able to improve their circumstances by living together, sharing expenses, rather than getting more money by living apart, as is currently the case.

Just googled the following, this was in Nigel Lawson's budget speech in 1988.

The present system for the taxation of married couples goes back 180 years. It taxes the income of a married woman as if it belonged to her husband. Quite simply, that is no longer acceptable.

This is a matter on which there has already been extensive consultation. The time has come to take action.

I therefore propose a major reform of personal taxation, with two objectives: first, to give married women the same privacy and independence in their tax affairs as everyone else; and, second, to bring to an end the ways in which the tax system can penalise marriage.

It works well in Germany. No one is seen as inferior. And by household, I assume there it is only married couples or those with equivalent status. Children would be classed as single whether or not living with parents.

Women already give up careers because the cost of childcare make it not worth working. Joint taxation will increase the marginal rate on the lower earner, meaning more dependent women. (It's not good for men either, economically helpless women need larger divorce settlements!)