Well, here we go again.
This time it’s all about the UK tax system and what is wrong with it for the low paid. OK, for you guys that are not in the UK, this is how the system works.
If, you go to work for 30+ hours a week and have a child under 16 or in full-time education. You can apply for a Working and Child Tax Credit.
The Child Tax Credit amount to £2,845 per child a year. As long as you don’t earn more than £16,190 this amount stays at the above rate. If you do, you need to take the different between the amount you earn and subtract £16,190 from it. Then, subtract 39% of this amount from the £2,845.
Then, there’s a Working Tax Credit. Which again, provides more money as long as you work more than 16+ hours but don’t earn more than £6,190. If, you happen to work 30+ hours you get a bonus of £790. So, typically a credit of £4,600 per year if you are under £6,190. Otherwise, the same rule applies. Take your salary subtract the £6,190 amount from it. What is left, take 39% of it from the allowance value of £4,600.
Now, the point of this article, is the trouble with this system. HM Gov pays these payments in advance of the actual Tax year you are actually in. So, for example. We are in Aug 2010.
But, Tax system credits that would have actually been paid are the allowance for 2011/12. So, if you stop this merry go round, by getting yourself a job that is more than the cut off rates or fail to submit a claim.
You then end up with the Taxman demanding £2,500 overpayment. Which, is a tad rich, as you didn’t make up this lunatic system that is totally open to fraud.
As HM Gov system pays in advance of you knowing your actual earnings for that 2011/2012 year are? If, you do stop the roundabout. This generally will automatically put you into debt!
That’s £250 of tax income a month over 10 months, that actually works out to be £350 (assuming you are in 20% tax and 10% NI) before tax to pay £250 a month back. That’s, £4,200 a year before tax and National Insurance!
WHAT PLANET is this HM Gov on?
Not only does the system become a serious financial burdened on the now not so richer job seeker. But, it’s a £4,200 reason, not to stop claiming.
Surprisingly enough, these credits are based on income that is actually received. So, you could be director of a company earning 1,000’s pound in a Limited Co. But, as long as you can keep your head above the water with £16,100 in income. Your set for Her Majesty Gov – i.e. you and I continue to paying these credit payments. If, you can manage to keep the income below £6,100 like our pensioner has too. Then, your budget goes to £13,500.
What a system! Payments made upfront. So, the not so honest get the money and then disappear only to set-up camp elsewhere.
For the Tax efficient crew they live on £16,100/6,100 year while earning £x,000’s in a Limited company. Which, no doubt can pay for most of those little expenses without the Tax Man noticing.
Even a good enough reason to start a UK business that provide USA Car parts? Surprising, most USA out fits will not send USA kit outside the country. So, of course the directors will need to visit the USA to purchase and get them shipped back to the UK. There’s a nice two week jolly under businesses expenses.
So, imagine the fun I could have with other credits. Like Housing credit. This is where the rent is paid by the council. The trouble is house/flat is owned by housing claimants family?
Need I go on…..
The trouble is, those that really should being helped. Generally, don’t claim.
As they believe in their own self-respect. However, other’s are not so humble are taking the system for everything they can. As it’s their right!
The only way to stop this roundabout is to ensure that the wages paid to the low paid from companies are high enough to remove them all from this credit based system.
As currently, the general tax pay, is subsidising companies (Corporates included) into paying low wages. Which, is why this Credit system was invented.
Of course, when do you want to claim you have to call a 0870 chargeable number to be answered by a call centre person that takes you through the claim form over a few mins. Then, states you can actually have a form to complete from scratch. Although, they have made you already provide the information to them to complete the form before they will send the form in the post for you to fill in?
Phone number with an Automatic answer and provide an address via house no and postcode via the phone’s keypad. For those that can’t handle this provide a website and ask the same questions in House and Postcode and then send it either via e-mail or postal address.
Sorry for the call centre. But, it was a non-job in the first place.
Put the Road Tax on to petrol and make the insurance company take the onus to ensure the vehicle is MOT. Make the MOT a yearly basis from new to ensure that cars are kept roadworthy and emissions are reduced.
Simpler tax system. The more you travel the more you pay in Road Tax via petrol. Get people to take the car to MOT on yearly basis will stop wrecks on the road. No MOT – Car is crushed.
‘Simple’ as a Fury Friend says.