.. 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?

With 2 working parents, our childcare costs are sky high. That money is then taxed again. Not to mention travel costs.

We pay enough tax as it is.

The old 'divide and conquer' mindset that the Tories like to instill is alive and kicking.

I disagree with the OP. Taxing individuals is much fairer than taxing households. If you feel that you're worse off as a result of having a sahp, then don't have one.

No absolutely not. I have a right to work, a right to earn, a right to pay my own taxes, a right to financial independence and i will be absolutely fucked if I will go back to the good old days of losing that right if I chose to live with a man or get married. I don't want it for me, I don't want it for my daughter and I would bloody fight it every inch of the way

Well said Bluntness...

If you feel that you're worse off as a result of having a sahp, then don't have one.

This isn't just about SAHP, it's also about low earners.

We would benefit from this but I still don't agree with it for the purposes of taxation, because of more or less everything SecretNetter wrote. Households with 2 workers have more costs associated with working and presumably work far more hours as a household than those with only one worker.

Household taxation works perfectly fine in France too..... we get allowances for the kids and everyone gets at least 10% for work expenses (if you spend more then you declare more) - deducations and reductions all go on the form (time I started doing this years').... I don't understand what this fuss is about independant taxation - it's "family money" - and I'm the one who does the form filling so - but we both have to sign it.
The kids who have student jobs don't have to add their income to the household finances if they earned less than 4343€ in 2016.

Then the total household income is divided by the number of "shares": each parent is 1 share and the kids are 0.5 share each for two kids but a third child is worth an extra 0.5 so
Mum + Dad + 2 kids: household income divided by 3
Mum + Dad + 3 kids: household income divided by 4

Then total income less allowances, reductions, deductions (charitable giving, childcare costs, union subs... loads of stuff is taken into consideration) is divided by the number of "shares" to calculate your income tax for the year.

So it is perfectly possible and I do not feel in any way diminished as an independant woman because we have one form for the household.

Marriage allowance means that if one worked and one sahp then the working one could get some of the sahp tax allowance added to their own ... for your example.op. not sure if I have that totally right but that's my understanding of it!

The tories brought it back SnapJack, or at least I think they did, however you could only transfer around £1k so it is worth around £200 per year. We wouldn't get it even if we were married as I think it was for basic rate payers only.

It's pretty much negligible, SnapJack.

Gods know. Changing the status of women from appendages of their husbands to independent tax returners was one of the few things Nigel Lawson did right for women.

If a couple have children then one at home, one on, say, 90k may pay more tax but have none of the massive costs of two people on 45K each. Your 6-700 a month would not come close to childcare or any of the ancillary double expenses paid out - commuting, work clothes, other work caused expenses).

The top earners should pay more as the main beneficiaries of tax cuts in the 'good times'.

*I agree with one of the earlier posters - how would you define a household?

The DWP manages ....*

Ah yes, DWP and UC - such a roaring success in protecting vulnerable women and children.

Stop focussing on SAHP / childcare costs!
The current system is unfair when there is a high earner and low earner (or non-earner): 2 persons earning £45k each will pay less than one earning £80k and the other £10k. And no benefits for the £10k earner because of the other person's high salary.
Unfair.

In France it works well: combine household income, divide by number of adults + 0.5 per child. Tax and benefits are based on the resulting amount.
So it takes into accounts childcare costs as well.

That sounds massively complicated to administer - and I have no idea how it would be done.

Just putting our salaries in the take home pay calculator:

DH: £160K - Tax £57,800
ME (part-time): £25K - Tax £2,700

Total tax = £59,700

Household income = £185K (2 x £92,500)

Tax = 2(£25,700) = £51,400

So we would pay £8,300 less tax under your scheme (assuming it was this simple!) AND have the benefit of a less stress household (plus potential financial benefits of not paying for a cleaner, dog walker and for childcare - all things I would pay for if DH and I both worked full time). I really don't think people like us should be paying less tax...

Apologies for the minor errors with my arithmetic sigh!

Do the countries that have household taxation make every household do a tax return? Does it work well?

In the UK, most people pay tax direct from their salary and only high earners, the self employed or people with complicated finances (investments, rental properties etc) have to do a tax return. A big criticism in the UK is that the tax or universal credit system is clunky, inefficient and riddled with errors.

If every household had to do a tax return, would it be the same? Would people be told they owe no tax one year, and then the next year be told they owed thousands, to be left struggling to pay it back?

Although I can see that if tax credits and income tax all worked on the same household system, it could be combined and households would receive benefits or pay tax depending on their total income and family size?

Currently we tax on individual income, but then assess for benefits on household income (and savings).

This is the stupidity of the system. HMRC - who administrate Tax Credits - base WTC & CTC on household income. And yet HMRC - in administrating PAYE etc - tax us on individual income. Surely one or other should apply, not "let's change the rules to suit maximise revenue".

Do the countries that have household taxation make every household do a tax return? Does it work well?
From what I remeber, you each fill out a tax declaration including the NIN of your partner, and they then add them up.
There is no taxation directly on salary, instead at the end of the year you declare your earnings and pay the taxes then. So in 2017 we would be paying taxes for the 2016 earnings.

Firesuit it was possible to be taxed separately before 1988, I know as we were taxed separately. It just meant giving up the married man's tax allowance. The 1988 speech was typical politics announcing something as positive when what they were actually doing was taking the extra tax allowance of the lower paid.

Exactly EggysMom

The current system disadvantages low earners with a high earner partner.

How about people who earn over 80k stop whining and cough up?

I'm not sure there's enough of them to make much meaningful difference. It's something like 5% of the population who earn more than 70k, isn't it? So presumably even lower for 80k.

Sadly I don't think Labour have any policies that they could actually implement- just pipe dreams.

Until they have a robust financial recovery plan and get rid of Diane Abbot they are unelectable and the Tories know it.

I'm not sure where you live op, but this wouldn't work in the UK, too many people would abuse the system by not declaring the entire household/claiming they are single

Two people working are producing more for the economy than one

How about people who earn over 80k stop whining and cough up?

The 80k was an example, though.
I am sure the result is also unfair with for ex £30k + £30k vs £50k + £10k.
The questions is really: why take individual earnings into account for taxes but household income for benefits/tax credits? That is what is unfair.

Also, regardless of how much you earn, what is wrong with wanting to pay the same as another houshold earning the same??