Southampton: GT verdict on Gordon Brown reign
After 10 years as Chancellor, Gordon Brown's legacy has resulted in an overall increase on the tax burden equivalent to 10p on the basic rate of income tax according to leading business and financial adviser Grant Thornton. Furthermore, the UK is now lumbered with more than double the number of pages in its tax code, increasing from 4,555 to 9,973* since 1997.
Of the 10p, around 7p is caused by fiscal drag, a failure to raise income tax allowances and rate bands in line with earnings which in turn drags more taxpayers into higher tax brackets. Furthermore, the cash income tax take for the Treasury has gone up since 1996/97 by some £29b more than if it had gone up in line with the growth in the economy during that period.
The findings come on Tax Freedom day** (June 1), which marks the day after which the average UK taxpayer can expect to stop working for the taxman and instead pocket their own earnings.
David Tipple, tax partner at Grant Thornton South Central in Southampton, commented: "Silently the tax take continues upwards with fiscal drag raking in yet more revenue year on year. If income tax allowances had risen in line with earnings, then the average taxpayer would achieve tax freedom a lot earlier in the year. "
Tipple believes the forecast for next year may be worse. He said: "Despite headline announcements in this year's Budget of dropping the basic rate of income tax, aligning NIC and reducing mainstream corporation tax, the reality is that other increases will lead to a maintenance of the status quo. Brown simplified the tax bandings for income tax by removing the starting rate of 10% in some circumstances. But this, coupled with aligning national insurance to a higher tax threshold will in total eat away most, if not all of the savings generated from cutting the basic rate of income tax by 2p to 20p from April 2008."
Government figures also show that the number of higher rate taxpayers now stands at 3.5million, an increase of 58% since 1997.
Tipple: "Those on higher incomes and at the upper limit of NIC, approximately £35,000, will now receive an extra £325 in 2008/09. However, many on lower incomes will actually be worse off under the Budget change due to the removal of the 10% starting rate and will be dependent on tax credits to prevent losing out financially."
