.. 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?

[AuntieStella]

I'm old enough that I remember how hard won was the right to independent taxation.

I would hate to see it go.

[NeoTrad]

A woman having her own tax return gives her full control over her own money.

In France, second earners are effectively taxed at the first earner's marginal rate. Not having progressive tax bands for second earners (which is what happens when households are taxed) is discriminatory.

[Bodicea]

It annoys me that people use the sahp plus high rate tax payer versus the two mid rate payers argument. it becomes an argument about the sahp advantages and disadvantages compared to two people working.
My dh is a high rate tax payer and I earn £24k so we are both working and have all the disadvantages of two parents out of the house and childcare etc and we get no child benefit.
We earn similar to a couple who earn £45k each but would get child benefit and pay less tax overall.
The system stinks!
It really should be based on household income when a couple is married.

[ChardonnayKnickertonSmythe]

Bodicea, I suppose people use their own situation as an example. You are right that this skews the discussion though.

[JanetBrown2015]

So those wanting a taxation of household income as a whole what about my neighbours who are two grandparents and 2 parents and ilve in servant (and presumably shortly the two grand children both 18_ will be working - 7 of them?
Then what about my house could we add together the 4 of us - all over 18 in earnings and I use the adult children' s single person allowances so be able to earn £44k tax free before I even start paying tax?

[ChardonnayKnickertonSmythe]

I'm happy for whatever definition is used for means testing for benefit purposes to be used for taxation purposes as well.

[BuggerOffAndGoodDayToYou]

I agree that it should be optional so that woman who feel the need to keep their finances secret and/or separate from the person they have chosen to spend their lives with can opt out. BUT my DH supported me for 15 years and for all but the first two of those he got no tax break for doing so. Me not working for those 15 years meant there was a vacancy for someone else not as fortunate as me to have a job, it's not like my old employer never replaced me!

[MissShittyBennet]

We're not going to have a situation where you as a household get to choose whether you want to be taxed as individuals or a unit though, because that would lead to a cut in revenue which would have to be recouped from somewhere else.

[Want2bSupermum]

The decrease in revenue would be marginal and what you would see is a system where benefits and taxes are aligned.

As for household, a great place to start with definition is the one used by benefits. The US system is very clear about what a household is too. Women also have the choice to file separately if they so wish. The only part of the definitions I disagree with is the requirement that you must be married. I think filing jointly should be an option for any couple living together. For those with DC I would try to make it advantageous to file a joint return with the OH just so that the lower earning person hasn't has the ability to access income and asset information, very handy if wanting to leave.

It smells like faux liberalism that women are taxed on their income separately. Countless times you see women on the relationship board trying to leave their Oh and having a heck of a time getting proper income information.

[grannytomine]

MissShittyBennet but that is exactly what we did have pre 1988, you could choose to be taxed as a couple or as two separate individuals.

[RoseAndRose]

"Countless times you see women on the relationship board trying to leave their Oh and having a heck of a time getting proper income information."

In Britain, it wouldn't make a difference as so many people do not have to complete tax returns. If you're in PAYE employment, significant other income stream, there is no requirement, and that covers most people.

[JanetBrown2015]

Actually that's true. Most people never go near a tax return for the whole of their lives.

So you 'd have to show the cohabiting couples were not blood relatives I supose (other than first cousins who have married) before making the tax advantages and pooling of allowances etc. I still don't like it at all. I am a single parent and I already get masses masses worse position on death in terms of inheritance tax liability just because I happen to be a single parent. In fact perhaps single parents should get 3x the inheritance limit tax free than a married couple because our children need more help if we die not less.

[ChardonnayKnickertonSmythe]

Do if most people never go near a tax return then how us a separate tax return going to help your hypothetical oppressed woman with the hypothetical controling husband who your mother fought for?

There's nothing to hide and nothing to see?

[minipie]

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.

Oh not this again. The simple point is that a family with two working parents is usually paying for childcare, a family with a SAHP is not.

If childcare costs were tax deductible then you might have a point.

[chilipepper20]

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

The US and Canada do it.

The point of filing jointly is that it is often in the couples interest. So, finding out who is a couple is easy: they'll tell you.

[ChardonnayKnickertonSmythe]

This has nothing to do with childcare or SAHP.

[MissShittyBennet]

Where's the evidence that it would be marginal want2b?

[BuggerOffAndGoodDayToYou]

If childcare costs were tax deductible then you might have a point.

They can be! If you get childcare vouchers then these are paid out of gross salary so that you pay less tax.

[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.

[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.

[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.

[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).

[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!

[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)

[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?