The Shocking Truth about Tax on the Poor
Have you ever wondered how much of one’s total income is taken up in tax? And I don’t mean just Income Tax. I mean in ALL taxes paid by ordinary taxpayers throughout the course of a year. Such a figure would need to take into account National Insurance (income tax in all but name, some might say), the insidious Value Added Tax or ‘VAT’ – which on its own is a hefty 20% tax on what is often already taxed money for most ordinary taxpayers, and don’t forget to include Council Tax and finally, of course, Income Tax itself.
Well, the answer may surprise you. Before seeing the answer, though, try The Guardian’s little quiz about this and see how you get on. There are only 8 questions, and for each you simply choose from 4 possible answers – so it’s quick to complete and, once submitted, you are immediately taken to a feedback page where you will be told how your answers compared to the average respondent and, more interestingly, what the correct answers were. It’s interesting to note that, in a joint poll by The Equality Trust and Ipsos MORI, nearly 70% of people drastically underestimated how much the poorest pay in tax, as a percentage of their total income. They also over estimated how much the richest pay as a proportion of total income. This wide misconception is due to most people incorrectly focusing only on Income Tax alone which, in reality, only makes up a small proportion of total taxes paid throughout the course of a typical year.
Spoiler alert: be warned that I’m shortly going to divulge the answers Read more
Many ordinary working taxpayers do not even know it exists, but The Taxpayers Charter is there to make sure that HMRC give you a service that is even-handed, accurate and based on mutual trust and respect. HMRC also want to make it as easy as possible for you to get things right.
Part of the Chancellor’s recent Budget included plans to recover tax owed to the Treasury direct from the debtor’s bank account — all done directly and without a Court Order being necessary. This has been criticised widely but HMRC says that only 17,000 people in the UK per year would fall into this potential scenario and that it would only occur for those owing more than £1,000 in unpaid tax or tax credits owed. Moreover they say that they would only target long-standing tax debts from those who had received a minimum of 4 payment demands and whose bank and savings accounts combined had a minimum total balance of £5,000 or more remaining after any tax bad been directly seized. Also the debtor involved will have been issued with a final warning period of 14 days, during which the funds concerned would be frozen, before any tax was directly withdrawn.