.. 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?

[OlennasWimple]

I am relaxed about making it a choice whether to file separately or jointly. TBH when a man is financially abusive, how to complete tax returns is the least of a woman's problems. I don't see how joint taxation makes her situation significantly worse - but as Want2be has repeatedly said, joint filing means that both sides have to be transparent about all earnings and income, which can be helpful if assets have to be split in the event of divorce

[NeoTrad]

Why the hell should the onus be on supporting women to fight a battle that can, quite simply, be removed?! Your sexism is astounding.

[Want2bSupermum]

So DH earns way more than me but why should I then pay less in tax. We have enough and it's not an issue for us to pay 40% tax on 100% of my income.

Filing single status would be better for me but I'm the exception as very few people make as much as £300k a year. Also the benefit is marginal. I want to be on the tax return with DH and know exactly what his financial status is.

[Want2bSupermum]

neo Why should a man or woman have the power over the money?

I think the focus needs to be on supporting woman to not tolerate anyone holding power over them. DH earns way more than I do but I'm an equal in our marriage. I'm made sure it's that way and it's part of the reason I continue to work.

When it co es to household financial arrangements I do not understand why a couple who live together don't have a joint bank account. I'm married but the week I moved in with DH before we were married we set up a joint bank account and that's where gifts to 'us' went. The world has changed a lot and there is absolutely no need to stay in an abusive relationship where one party holds power over the other.

[grannytomine]

The separate taxation of husband and wife was a hard fought and wise achievement in the UK. It means we each earn our own money and pay our own tax and have our own tax rate. It think it works well. It also helps ensure that women keep working as your husband can't say to you no point in your working as it will all be taxed at my (husband's) highest rate of 45% so stay in the kitchen little woman. Thank goodness we moved away from that in the UK. So you are completely ignoring the fact that you didn't need to fight this at all, you could always be taxed separately if that was your choice, no one forced a couple to accept the linking of tax and accepting the extra tax allowance for married couples.

[NeoTrad]

It is actually important that separate taxation confers a tax advantage on the second earner.

[MrEBear]

Supermum there can't actually be that many people in the UK earn over £300k.

So maybe it should be a case of couples given the option to file tax separately or as a couple. Either way it should not make any difference to the amount of tax paid. Or if it's the couples choice to file sepertately then they end up paying more.

If two couples earn £80k they should pay the same amount of tax. And get the same back in benefits.

[NeoTrad]

Want2BeSupermum - think of it another way: why should women endure the aggrievation of negotiating their finances with their DH? It's always empowering to have sole decision making power,

[ChardonnayKnickertonSmythe]

Why do I even bother?

[OlennasWimple]

Janet - actually, parents could elect who would receive the child benefit (and the associated NI credits). In our case, DH used to receive them, as his employment was less stable than mine

[Want2bSupermum]

mrbear DH earns more than that I have continued to work. Yes I'm the only one in his peer group with a career wife but I hope I'm being a trailblazer for other wives who might think they need to stop work or have a very PT job for the sake of keep up appearances (it's a cultural requirement to have a job in denmark but when it involves working at a travel agents for 5 hours a week on weeks when they are available I don't consider that work).

As for others, janet the US has 'head of household' for single parents such as yourself. The allowances are very generous.

Yes children who earn less than about $6k a year don't file a return. Once they make more than that they need to file as single. iHT is generous too and only taxed on estates worth more than $5m, although I think they might have changed it to $10k. Trump wants to eliminate it because those with significant assets hire people to avoid it.

As for how much it would cost/save. It's hard to give concrete numbers but I would estimate that plenty of households would all of a sudden not qualify for benefits that they previously qualified for.

I am still really struggling with how women being taxed as individuals is empowering. Here in the US your tax return gives you the option to pay refunds to more than one account. We pay our refunds (we get federal and state refunds) into retirement accounts and our vacation account. I'm very involved in our family finances and much more clued up than DH is. We do our numbers together though as being financially sound is important to us.

[JanetBrown2015]

Yes, that's why child benefit when it replaced family allowance and tax allowances was paid to mothers as in those days you had some very very very right men who hardly gave their wives a penny and the chilren and wife literally had not enough to eat - the child benefit ensured the wife could buy food. It was money paid direct to the woman regardless of the income of the husband.

[NeoTrad]

Even if your DH is earning £300k or more, you might want to hold onto your own earnings!

[MrEBear]

Done properly the only way somebody would pay 45% on all their income would be if the OH was on £300k (2x the current £150k) and not being funny if your OH is earning that you ain't going to be chained to the kitchen sink either.

[ChardonnayKnickertonSmythe]

Yes, you said that before Janet, almost word for word.

But that's not what I asked you.

[JanetBrown2015]

The separate taxation of husband and wife was a hard fought and wise achievement in the UK. It means we each earn our own money and pay our own tax and have our own tax rate. It think it works well. It also helps ensure that women keep working as your husband can't say to you no point in your working as it will all be taxed at my (husband's) highest rate of 45% so stay in the kitchen little woman. Thank goodness we moved away from that in the UK.

[MrEBear]

Thinking about kids. If you have 2 parents on benefits and their kid gets a paper round does the kids money get taken into benefits calculations?

I think including kids income on tax able allowance would be too hard to manage. Kids move out, kids may be at uni for 10mths and home for 2 are they part of the household for 2 or 12 months, if they flat share are they a household for 10months?

But couples should be taxed together getting away from the discrepancy of one couples income being taxed more than another's. One 60k earner and a 20k earner both working full time, with associated expenses, travel, cloths and childcare will be paying more tax than two 40k earners. Oh and your 40k earners will be getting child benefit how is that fair?

[OlennasWimple]

In the US adult children have to file their own returns. Younger children who earn under $6300 do not need to have that income included on the tax return.

Seems simple enough to me

peuk - why would the two adult household in your example automatically pay less tax than the single adult household?

[ChardonnayKnickertonSmythe]

I realise for benefits purposes we already do add together household income but for income tax it does not seem right to me.

Why doesn't it seem fair to you?

[JanetBrown2015]

Hopefully it won't happen. I would not like us to change back either.

If you excluded income of adult parents and adult children living at home and just did it on the basis of people who were having sex together within the home that gets a bit complex - particularly was in London borough we have polygamy never mind polyamorous people. I realise for benefits purposes we already do add together household income but for income tax it does not seem right to me. I would rather it stayed as it is.

(Yes I am well over the IHT limit as a single parent and obviously very lucky to have picked work which pays well which has ensured that this the case and always worked full time for over 30 years now and counting)

[peukpokicuzo]

I think this is a terrible idea.

There's certainly room for reform in the tax system. However, currently a single parent eg a widow earning say £50,000 (so not entitled to any benefits) pays exactly the same income tax and NI as a household of two adults both capable of working but with one earning £50,000 and one being a SAHP - that is unfair because the single parent has childcare costs and may also have to buy-in assistance with day to day household chores too depending on their working hours, so they are worse off.

Taxing buy household would make it more unfair - the two-adult household would actually pay less tax than the single-parent household despite having an easier life.

If they do start offering an option to be taxed jointly, with an opt-out, then you could only make it fair by saying that any adult in the household deemed capable of working and choosing not to will be deemed to be effectively earning the national average income and spending that money on employing themselves (ie the money sums to zero) and adding the tax on that only to household tax bill, so that having an economically unproductive adult supporting the household is taxed as the luxury it is, not encouraged!

[minipie]

BuggerOff yes but that's not the same as the whole cost being taken off your income for tax purposes. That's the only way it would be fair to compare the income of a family with two working parents against the income of a family with a SAHP - you'd have to deduct the whole cost of childcare from the first family's income. (which would be difficult, because some people choose to use more expensive childcare, some have free childcare, etc).

[MrEBear]

If you include children's incomes you would need to increase the tax free allowance.
I think including kids would make it impossible to manage.

[AuntJane]

I assume you would also include the children's income from paper rounds, Saturday jobs, etc.? They are, after all, part of the household.

[grannytomine]

JanetBrown, if the inheritance includes the family home you don't have to worry about the first £425,000, if you have treble that to leave them then I think they can afford to pay the tax.