Does the UK tax system seriously discriminate against single parents?

[Porcelaincup]

Single parent of an adult child.

I am fortunate that, in the last year, my annual salary has risen to 50k. Personal allowance of £11,850, therefore I hit the 40pc threshold. Yet, if I was married and each of us earned 25k, we would have double the combined personal allowance and not hit the 40pc threshold. My mortgage and most household bills would be the same whether I was married or single.

Inheritance tax rules mean that when I die I can use the extra residence nil-rate band to leave a property up to 500k to my child exempt from inheritance tax. But if I was married, I could leave a property worth up to a million.

So. I pay more tax on my income than two married people with the identical total income. And then when I die, my child has pay more inheritance tax on my property.

AIBU to think this is discriminating against single parents?

Bluelady, I appreciate that that sounds a lot of money, but for me it isn’t so much the sum itself, it’s the issues with the property market. Round here half a million will get you a 2 bed flat. The introduction of the residence band was to help parents leave their main residence to one or more of their children. Presumably to address the way the government have systematically screwed up the property market.

If it were the case that young people had a hope in hell of affording to rent or buy, then I probably wouldn’t care much.

But with that situation as it is, the child of a single parent should not be disadvantaged.

But a married couple each earning £25,000 is NOT the same as a single person earning £50,000.

The first is two people, the second is one person.

I think that you are looking at this completely wrongly.

And incidentally, your salary is hugely above the average. If you have a problem with paying the tax you are legally required to then maybe get a lower paid job.

No? Thought not!

OP, the taxation laws are there to penalise everyone as much as possible whether married or single. I agree with you, in your situation, you are being penalised compared to a married family.

Similarly, step-parent who live with the parent with residence is penalised as their income will be taken into consideration for the purpose of child benefit, tax credits etc... but the income of the non resident step-parent is totally ignored. That despite the fact that the child could potentially be closer to the non resident step parent than the resident one.

It's just easy taxation. Fairness rarely comes into it!

It IS a lot of money, it doesn't just sound like it. If you leave a £1m property, your child will end up with £800k after inheritance tax, not really so bad, is it? I imagine it's a problem most of us wouldn't mind having.

Porcelain enabling people to leave their property to one of their children tax free screws up the property market more not less!

The scarcity then drives prices up and screws the poor sods who don't inherit over utterly. Let alone the"pick your favourite child and give them a house, sod the others" idea...

Won't the child of separated parents inherit twice at different times but the child of married parents will only inherit on the death the second parent. So the child of separated parents gets the tax free portion twice!
Also, i thought maintenance isn't counted as income for tax credit purposes. So that's a leveller.
Tbh it isn't enough to be worth a divorce!

Crikey! That seems a really blinkered way to look at it!

I am married
I don't have kids
I have never claimed JSA, housing, tax credits or any other state benefit. Not since I started paying income tax at 17, 35 years ago.

So... I have never had any of the tax breaks any parents get. None of the benefits my income tax contributes towards.

I have never claimed unemployment benefits nor, because we have 2 incomes, any of the other benefits that my income tax contributes towards.

Am I complaining that I should be given a 'special badge' for this? No! That's just how the tax system works. How would you like it to work? How about, every person gets their own government tax inspector who works out how to give you the tax breaks they think are equitable?

Pshaw!

No. Because your personal allowance is just that. Yours.

Inheritance tax is just wrong.

A married couple could leave their child a property that child could live in for the rest of their life. A single parent might not be able to do that
In many areas of London and SE where many people can find themselves asset rich but cash poor, even the children of a married couple may not be able to hang on the actual property itself. Also there’s nothing to say that a single parent is going to be financially worse off than a married couple. A single parent can already leave up to GBP450,000 in primary residential property to their child/ren. Up thread some one mentioned losing all their child benefit because as a single parent they earned over the GBP60,000 threshold. These are not figures that will garner much sympathy I fear. As far as any kind of tax is concerned surely every individual having the same tax allowances, with tax owed increasing in percentage incrementally based on income for income tax (or property value for council tax, or emissions for vehicle tax etc etc) is the only fair approach.
Btw I do agree with regard to the Child Benefit issue, with it based on high individual salary not household income. Not that a household on GBP50k plus should get it but rather a combined household on GBP100k should definitely not get it.

Alone why on earth is inheritance tax wrong? Do you mean morally? You think it's morally wrong to tax unearned income?

chickenowner, I never said ‘AIBU to think I have a really low salary’ or ‘AIBU to think I pay too much tax’. I questioned whether single parents are discriminated against in the tax system.

From the informed posts I have decided that actually, it isn’t so much single parents being disadvantaged by income tax, it is the combination of a higher and a lower earner. That does have an impact on the actual money in a household.

As for inheritance tax, I maybe am not being clear. I agree that inheriting property screws up the property market, although not so much I think as the selling off an not rebuilding council properties. I agree with you all that 800k is a lot of money (not that I live in anything event remotely close to a 1 million pound property)

My issue is that I feel a child of a single parent is is not treated the same as the child from married parents.

I don’t care much what we do, just as long as it is equal

*unearned wealth, technically

Yes your personal tax is yours but on marriage family money is family money. So there are two different treatments going on.

It's difficult to address this without going back to dependent taxation which we probably don't want but the fact is, a couple on 25k have significantly more income to spend on their family than a single person on 50k. And although the couple are two people so more food, more clothes required, this is offset by the sharing of accommodation costs, utility bills etc.

My issue is that I feel a child of a single parent is is not treated the same as the child from married parents. I can't get my head round that!

Not in the slightest!

They absolutely are treated the same - they have the right to inherit from their parents. They have 2, no matter how they were conceived, we all have 2 biological parents! All that happens after that can happen to anyone... death, divorce, desertion etc etc. That's just life! You want the inheritance laws to reflect the myriad of life choices, calamities, and every day occurrences? How?

I have never claimed unemployment benefits nor, because we have 2 incomes, any of the other benefits that my income tax contributes towards.
Am I complaining that I should be given a 'special badge' for this? No! That's just how the tax system works.
This.

People pay tax on THEIR incomes as individuals.
2 people get taxed as 2 individuals because there's 2 of them.
Hardly discrinination that 1 person gets taxed for 1 person.

Now there are other factors and costs where being single works out proportionately more expensive, but feeling sorry because you have to pay tax oj your earnings at the same threshold as any other person is a bit much.

curious the tax system is actually often used to to help us cope with various different circumstances. Ditto the benefits system. That's why it's not a flat rate and why there are rebates and exemptions to reflect different situations.

It's not well designed for this purpose as it's primarily obviously for taxraising - but the fact is governments do use it to alleviate hardship or to promote certain sorts of activity.

I totally agree that it cannot be perfect in this regard - but some of the quirks of it are particularly irritating to those raising a family on one income.

Curious, that is a fair point to be honest. They do have the right to inherit from both parents and you can’t have a system that covers everything.

My issue is that I feel a child of a single parent is is not treated the same as the child from married parents

But that’s sort of the point. With regard to IHT they ARE being treated exactly the same.
For example as an individual if I die I can have GBP325k allowance before I owe IHT on my estate. That is deferred for obvious reasons mentioned already. My husband gets my estate. If he dies he gets GBP325k allowance before he owes IHT. At the point of the second death both allowances are applied and all IHT owed to the government gets paid which depending on the value of the estate may or not mean our children get the actual house or just an amount of money after the property has been sold to pay IHT. IE the children do not owe the money, the estate does.
You as a single parent and an individual get exactly the same GBP325K allowance as I get as an individual or as my husband gets as an individual. You mention that your DC have a father but that he will choose not to leave them his money. He just as easily could choose to though. How do you think any government could possibly legislate for that?

Ha x post with curious!

Taxation on inheritance tax is not untaxed earnings. Anything you own has already been taxed and you should be able to pass it on tax free as it's money/property that's already been taxed.

Yabu op , your 50k only has to support you and your dc. My dh wages has to support myself as his disabled wife and his dc.
Why should you pay less tax?

Judas, I honestly do get what you are saying, but it still feels different treatment. But I am genuinely open to being shown that I am being wrong. Let’s assume that the mother, or father, of a child from a single parent has been absent from birth. No contact. Not on the birth certificate.

What if the estate was exactly that - modern version I guess of an ‘estate’. It was a 650k house. There is no other money at all. In the married scenario, parent one passes their 325k to parent 2. Parent 2 leaves the house to the child. So, the child inherits a 325k house.

For the child of the single parent in the conditions above, they don’t.

Sorry...the child inherits a 650k house!

Nope Antislut - if you bought a house for 60k and it's now worth 260k that's 200k of unearned wealth.

In addition to which all income is taxed multiple times. You've paid income tax on the tenner in your pocket, but if you use it to buy yourself a packet of tampons and some toiletries you'll pay 20% VAT again. You pay capital gains tax (if you obay the law) if you sell expensive possessions too.

Most financial transactions can be taxed.

Alone why on earth is inheritance tax wrong? Do you mean morally? You think it's morally wrong to tax unearned income?

Tax has already been paid on the inheritance. My FIL had to pay a huge IHT bill when his DM died. Her DH had worked hard all his life, saved hard, prudent etc. He paid tax on his earnings, he paid tax on the interest on his savings, he paid tax on his pension income. FIL (and his siblings) then paid tax AGAIN. Definitely not fair.