To ask how you would reform the tax system?

[BuffaloCauliflower]

I’ve been thinking about this for a while and of course lots of tax talk for this election, but think more clued up Mumsnetters can probably do better than me. This morning I’ve discovered that in the U.S. they get money off their taxes for mortgage interest and doing home improvements. Mind blown, I’d never have thought of that. I think you can file as a couple instead of two individuals there as well, and tax breaks per child? Of course lots wrong with the U.S. system (everyone having to do their own tax return, and lobbying accounting firms preventing a PAYE scheme that would put them out of business for one) but it got me thinking about possible changes in general. I’m mainly thinking around personal tax rather than business tax, though feel free to think big.

I think putting the personal allowance way up to bring a lot of people out of paying tax would be a start, this would also save some money on UC for the lowest paid. We know most tax is paid by higher earners anyway. Fix the cliff edge that’s earning over £100k too. Maybe be able to opt to pay taxes as a couple if you choose if one member of the couple is a much higher earner, for UC you have to be treated as a couple for your income but not for other households.

Interested to hear thoughts

I'd lose the personal allowance as the idea is everyone pays into the welfare state and everyone can use it.

I'd scrap child benefit entirely and instead fund proper childcare.

I think I'd go with a 10% income tax from 0 to 35k to reflect that I just ditched the personal allowance.

Then 20% to 60k

Then 40% from after that.

I dont know what I would do with national insurance.

I'd change stamp duty to a capital gains tax on sale rather than value on purchase.

I'd do something different to council tax around wealth. I dont know if it woukd just be more bands as i feel the top and bottom band are too close.

I havent costed or thought through these suggestions at all.

This is money has some good suggestions on their podcast this week.
simplify it. Up the frozen thresholds to remove some of the fiscal drag and make marginal tax make sense as well as meaning pensioners won’t find themselves suddenly above the personal allowance and having to do self assessment

I think filing as a couple is an interesting one but don’t know how many it would benefit given the increasing need for people to have both parties in a household with children work.

Income tax relief on mortgage interest used to happen in the UK - it was called MIRAS.

I'd introduce multiple bands of income tax.

So rather than the 20% 40% and 45% we have now it would be a sliding scale increasing percentage with bands at say 35%, 40%, 45%, 50%..... up to 60or 65%

Probably I would up the thresholds for lowest band so more people on low ages wouldnt pay any income tax..... So ultimately most people earning decent wage would pay a little more tax - but it would be more in proportion to earnings and the increase would be less noticeable for the lower paid.

I am not an economist or mathematician so haven't worked out the specifics or costings but this is what my gut instant is to do.

Abolishing it, in spite of the numerous convincing sounding arguments from economists for doing so, was a disaster for the housing market in the UK.

The one lesson I took from the whole sad saga was that economists are not to be trusted.

Agree with many of your points.

Stamp duty needs to scrapped entirely. A tax on moving home is dreadful for employee mobility. Scrap council tax too and instead charge a % of the value of a house in council tax, making the rate high enough to cover the stamp duty scrappage. And yes old people would have to move out of big houses, but hey that’s life.

NICs needs to be merged into income tax. Going against the grain here but the basic rate of tax needs to go up by 10% if we want good public services. That’s what they do in Europe. The higher rate bands need to increase to make up for NICs being scrapped. The withdrawal of nil rate band at £100k needs to be scrapped and child benefit and free childcare should be extended to all to stop the stupid cliff edges.

Capital gains tax needs to be raised to nearer income tax rates, and Scottish tax rates need to be merged back into UK rates.

Inheritance tax ought to be 10% on everything except giving to your spouse or dependents.

1. Non-UK txpayer landlords of UK residential property to pay higher rate tax deducted at source from rent. Too many flats are owned by landlords who pay little or no tax on the rent they receive, driving up property prices.

2. Counter-intuitively, reduce the income tax rate to 20% on earnings over £3 million. There are very few people in this bracket anyway, and most will receive money in dividends rather than PAYE. The aim is to persuade them to keep money in the UK rather than offshore trusts which are of no benefit to the UK, and to live and set up businesses in the UK. The UK needs to compete with e.g Singapore where the top rate of tax is 22% and encourage entrepreneurs to employ UK workers.

3. Remove Capital Gains Tax on UK listed shares held for over 5 years to encourage investment in UK businesses.

Agree. We need to base our tax system on what boosts UK income, both from tax take and future investment / growth (and therefore boosted future tax take).

Not what various UK voters see as ‘fair’. Everyone getting child benefit boosts overall tax take, even though people might not think it’s fair.

Bring back the 10% tax rate. We have a problem with buy-in to democracy and when you pay some tax you feel like you have a stake. It was an ardent socialist that convinced me of this one.

Peg the tax thresholds to multiples of the National Living Wage.

Streamline National Insurance and Income Tax into something coherent.

Equalise tax on earned and unearned income. Reform CGT into this framework as unearned income. Regardless of how you come to have that income, it's taxed the same. The awkwardness with CGT is that you accumulate a virtual income over time that's only realised at the end of the period and it may have been earned unevenly in that period.

I'm not sure what to do with IHT as it's technically unearned income on the part of the inheritor. I know in other countries the equivalent IHT allowance is on the individual inheritors rather than the estate as a whole, and done correctly that could encourage spreading the inheritance benefit more widely.

Massively increase the VAT registration threshold. All the evidence points to the current limit having been far too low for far too long, it's creating a stagnation point for honest businesses and encouraging a lot of dishonesty amongst the rest.

We need big taxes on air travel. Mass tourism is horrendous for the planet, and people need to pay the real price of it. If that means just one foreign jaunt per year, so be it. Save up for it.

As far as I understand things (!!) corporation tax is already as high as in other countries - the problem is companies who aren't registered in the UK.

Not a tax thing, but I've always though it's more important to pay proper wages than to keep putting up benefits. We need to make it worth people's while to work, where it's possible for them to do so (before anyone jumps on me and suggests I'm calling for a return to the Victorian workhouses!).

Higher threshold. Higher tax.

Low earners paying tax then claiming tax credits is pointless.

Until Labour abolished it - Gordon Brown to be specific. No surprise there really.

Agree with taxes being designed around what makes sense for wealth creation in the UK - not what feels 'fair' to voters.

A booming economy will do most of the work in boosting available cash for public services. It's such a kneejerk reaction to say you have to increase taxes to have good public services. You don't. Reduce wastage as well - there's so much of that going on as anyone who works in certain roles in the public sector can tell you.

I would simplify both the tax and welfare systems. Both are too complicated. Flat rate single tax rate for all income, copprate, CG etc and a means tested "hardship" fund to apply to if required.

And I would reform CMS so that absentee fathers are expected to cover 50% childcare (so mothers can work) or provide the daycare if they are not working. Not doing so costs the taxpayer in UC top ups.

Brown just continued the trend under Clarke and the previous Conservative administration of tapering out MIRAS.

MIRAS distorted the property market, and interest rates had been stable at a much lower level from the early 1990s compared to the previous period of high interest rates and high interest rate volatility.

I would tax inheritance as income with £12k tax free allowance and a carve out for a someone inheriting all or part of their principle private residence up to the value of £1million.

It blows my mind that they do not have the equivalent of PAYE in the USA 😲

Business taxes based on turnover to replace business rates.
Stamp duty paid by the seller (reduces the amount needed for first time buyers to find).
Tax Personal Contract payments for larger and high performance cars.
A tourist tax on short term lets (if they are not restricted- Air BnB and the like).

I’d focus my energy on the massive cooperations that evade tax.

I disagree with the VAT point above. The VAT registration threshold should be dropped to £10k. This keeps any hobby Vinted traders etc out of the VAT system, but removes the widespread evasion of say takeaways who only take cash that claim to have a turnover under the threshold. It also brings some traders into VAT registration, which is a hassle for them but so many people currently decide to stop earning at a certain point in the year to stay under the threshold which is bad for the economy.

This would not be fair to those struggling to make ends meet in areas with high cost housing, where families are squeezed into small homes earning the same as others in low cost housing areas who live in palatial homes.

You would effectively discourage public sector workers from living in high cost housing areas. Lots of expensive housing areas do not get London weighting on salaries. Why should they pay more for council tax when they will be getting the same services and face higher housing costs. How is that fair?

The UK is working with other OECD countries to do just this. They cannot do it single handedly though. This is not something the UK can do anything about alone.

I agree with this but the bigger they are the greater their ability to evade tax, because they have more money to spend on better lawyers and accountants etc. Not to mention lobbying so that laws are made in their favor.
I can't see any solution to this 😡

Following to return later