Posts Tagged ‘tax’

It’s the start of a new tax year. That means another year of people trying to sell me their self-assessment services long after I have already filed mine. What joy.

Last year was a kick in the balls for small business owners. The government introduced a new tax on dividends, which is how small business owners typically pay themselves.

This year it looked like we were going to hit with the double whammy. First, that £5,000 limit was set to be decreased to £2,000, resulting in me paying tax on an additional £3,000 of income.

Second, the flat VAT rate for my industry was set to be increased by 2%. If you are not familiar with flat VAT, it is a scheme that allows small businesses to pay a set rate of VAT and not claim anything back on purchases, meaning you can avoid doing all the complex VAT accounting. It’s terrific.

This year hasn’t been a complete disaster. The VAT increase has happened, but the reduction of the tax threshold will not take place until next year. Add to that that the corporation tax rate had been reduced by 1% and the additional tax being placed on small business owners is irritating, but not crippling.

One thing remains clear, however. This Conservative government is no friend to small businesses. For a second year running, they have increased taxes in favour of cutting those for big businesses.

After David Cameron’s official response to his father’s questionable tax avoidance practices, I decided take a tip from him, and the internet meme that followed the statement, when submitting my tax return this year.

Unfortunately, HMRC would not accept it.

Dear Reverend Worfolk,

I am writing to you to confirm that we have not accepted your Tax Return (SA100) form, which seems to have been submitted as a joke. We can only accept a fully completed form. The deadline for paper submissions for the 2015/2016 tax year is 31 October 2016.

Yours faithfully,

I wrote back to explain there was no point me filling one in, as I wouldn’t be paying any tax.

Dear HMRC,

The thing is, I wasn’t actually planning on paying any income tax. I spend the money I earn on lots of cool stuff, which I pay VAT on. Therefore, like Starbucks, my “total tax contribution” is very high, even though I won’t actually be paying any income tax.

Yours faithfully,

Again however, they were not happy.

Dear Reverend Worfolk,

As you will no doubt be aware, you are required under the law of England and Wales to submit a tax return and pay any tax due. I now consider this case closed.

So I thought I best settle up.

Dear HMRC,

Okay, I’ll pay. I notice you recently cut sweetheart deals with Apple and Google. Given that they are massive multi-national corporations, and I am just an honest Joe (except I’m called Chris), I assume you will give me a much better deal. £10 and call it even?

Yours faithfully,

I have yet to receive a reply.

At the end of last month, I paid off my student loan. Sort of. I haven’t actually sent the money or anything practical like that, but the amount I have accrued in student loan tax is now enough to cover the remaining balance. So once I get my tax bill, it will be sorted. Just in time for me to start paying George Osborne’s increased tax on small business owners.

This gave me a moment for reflection. I am 29 years old. I graduated at 21, so eight years seems pretty good going. Most people, however, will not have the opportunity to repay their loan anywhere near as fast as me.

First, my loan was quite small. When I went to university, tuition fees were £1,000 a year. Most of my loan was made up of maintenance loan, the money they lend you to live on. This was about £3,500 in my day but is probably more now. The year after I started at university the fees went up to £3,000. More recently, they have risen to £9,000. Living costs are probably rising too, so let’s say you need £5,000 a year maintenance loan now.

In total that makes for £16,000 a year. Assuming you get your degree in three years (not everyone does), that means you will have built up £48,000 of debt by the time you leave university: almost four times the amount that I left with.

Second, I am a software consultant, which is a well-paid industry. Many people will never earn the amount of money I earn. If you are a teacher, for example, only senior management will have pay higher than a software engineer who is a senior but still very much in the trenches of everyday code writing.

According to the Official of National Statistics, as reported by the BBC, the average earnings for people with a degree are £29,900 per year. This compares with £17,800 for people without a degree.

Let’s say you are earning £29,900 as a graduate. £17,335 if that is below the threshold. That leaves you £12,565 that is taxable for student loan. This is taxed at 9%, so that means you would be paying back £1,130 per year. With a loan of £48,000, that means you will be paying back the loan for 42 years.

That figure is far lower than it would be in real life, however, because it does not factor in the interest on your loan. That will add a large amount on to your debt, especially as £29,900 is the average earning over your career, not what you will be earning at the start. Initially, you will be lucky just to pay the interest off.

This is irrelevant however as your loan is cancelled after 30 years.

What this means in practice is that if you go the university now, you can expect never to pay off your student loan. What you can expect to pay is an additional 3-4% tax for the 30 years after you start your first graduate job.

Is student loan a good idea?

I have written before about the difficultly of arguing against tuition fees, though there are some points that seem to hold up.

However, with the new system, the sheer nonsense of it all seems to work against the tuition fee system. We have a series of ‘loans’ that we never expect to be paid back. We’re not saving the entire cost of tuition because most people are never going pay it all back.

We are saving some money, of course, an additional 3-4% tax on graduates for most of their working lives is a considerable amount of money. However, given we could just tax everyone more, and then provide everyone with a free at the point of access education, without having to subject people to the choice of lumbering themselves voluntarily with the additional tax, you can make a good case for abolishing tuition fees.

Going to university is still worth it

Even with the current system in place, the best choice is still clear. As graduated out-earn non-graduates by an average of £12,100 per year, even with the additional tax of £1,130, you are still almost £11,000 better off with a degree.

I, on the whole, support tuition fees. Why? Because I do not think that poor people, with less earning potential than myself, should have to subsidise my education. If someone is working really hard driving a taxi every day, why should they pay for me to go to some fancy-pants university and get a piece of paper that entitles me to earn more money than them?

But I am not entirely decided on the issue. There are lots of good reasons to support not having tuition fees. For example, it probably puts people off going to university (I have not checked the stats, but I imagine this is the case). That argument in itself has factors that both support and oppose tuition fees.

The alternative, as well as realise though, is not a free education. I cannot be “free”. It has to be paid for in a capitalist economy. The alternative is an education paid for by the state, and thus reclaimed from taxes.

Either way, some one pays.

You could argue though that in a progressive tax system, the same person pays. Imagine these two scenarios:

Scenario 1, tuition fees. I pay £20,000 to go the university, except I do not pay it, because it is a student loan, taken by PAYE when I start earning. So I pay nothing up front to go to university. I go, do my degree and then graduate. Then I get a job and if I earn plenty of money I repay my student loan via the PAYE tax system. If not, I do not pay it.

Scenario 2, no tuition fees. There are no tuition fees so I pay nothing up front (just like above). i go, do my degree and then graduate (just like above). Then I get a job and if I earn plenty of money I pay a higher tax because the government has to fund all the education (as above). If not, I do not pay it (as above).

The scenarios above are basically the same. Either way, university is free at the point of access and funded by reclaiming the money using taxation. What difference am I missing?

Photos from the bedroom tax protest that took place in Leeds.

Hosting the Olympics has been a harsh affair. We’ve had to temporarily (hopefully!) transformed into a semi-totalitarian state.

But on the flip side, we get to go to the Olympics. Or do we?

The Olympic Stadium holds 80,000 people. So even if you allocate a rather large amount of 800 tickets to sponsors and other interests in the private sector, that still means we can sell 99% of tickets to the generic public. But apparently not. Only 75% of the tickets have gone on sale to the general public. When it comes to the high profile events, that already rather low number of 75% drops to 35%!

But, of course, you have to give some to the private sector. They’re paying for the games after all. Otherwise, the tax payer would have to foot the bill. But, as it turns out, and we all knew already, we are footing the bill.

According to the Guardian, sponsors have contributed £1 billion of funding. They’ve made the data available for free too. The Guardian is actually being generous here – a report by Parliament puts the figure even lower.

Meanwhile, the total cost was reported to the House of Parliament as being around £12 billion. Jules Boykoff points out this isn’t entirely accurate though and, indeed, according to Sky Sports, the figure is actually around the £24 billion mark.

So do the maths on that one. We’re footing 92% to 96% of the cost, yet we’re getting 35% – 75% of the tickets.

This week, George Osbourne rolled out The Budget. Norm described it as a budget he found “impossible to get angry about.” But I disagree.

The increase in the personal tax allowance is great, thumbs up there, well, on the most part. I’m not too bothered by the granny tax either, as state pensions have in fact gone up quite considerably in a time when many working people’s pay have been frozen despite the ever marching climb of inflation. Not to mention is that all that is happening is that their personal allowance is being lowered to match that of working people.

However, when it comes to the top tax bracket, it is nothing moe than a traditional Tory budget. There is little justification for giving 14,000 millionaires a tax break given the financial crisis we are in.

One of the clearest messages we have received from this government is that the previous one has left them with a huge hole in the budget and that strong austerity measures would need to be put in place. So, if it so important to plug the hole in the budget and pay back some of our borrowing, how can we afford to give tax breaks to the rich?

There has been much discussion about the benefits cap recently – on one hand you don’t want to put families into poverty, but on the other hand you can argue it’s perfectly reasonable to expect a family to live on a £36,000 salary – especially given the alternative, often a minimum wage job, pays only a third of that.

One of the biggest portions of this benefit is child benefit and the argument is made that this is required because parents cannot afford to go to work because of the prohibitive cost of childcare.

One solution to this problem however, would be rather than spending all the money on child benefit, to spend the money on free, or at least heavily subsided childcare.

This would mean that parents could get access to affordable childcare and therefore be free to work. It also means that lots more jobs would be created.

Of course you could argue that if you’re going to spend money paying people to look after children, you might as well just have child benefit so parents can stay at home. But this doesn’t stack up because it’s far less efficient to have everyone staying at home looking after a small number of children.

Just when you’re down enough there is always something to give you that little extra kick.

Went round drive-thru this evening to find that meals have gone up £0.30 as well as having gone up £0.50 on breakfast!