Belfast Telegraph

Thursday 24 July 2014

Middle earners 'lose out over tax'

The Government's tax changes will hurt families on middle incomes, experts claim

The Government's tax changes will hurt families on middle incomes, while manufacturers, oil companies and banks will also lose out under the new measures, experts have said.

The Chartered Institute of Taxation warned that families on between £40,000 and £50,000 are set to face a "considerable increase" in their tax burden as a result of changes to tax credits and child benefit.

The group said a considerable number of households where the sole earner is a higher-rate taxpayer are in the fourth income decile, meaning they already have a below-average income.

It said: "The effective freezing of the higher-rate threshold, the proposed withdrawal of child benefit from households containing a higher-rate taxpayer, and the reductions in working tax credit - particularly the childcare element - will result in those households falling further down the income distribution."

It warned that these changes would lead to middle-income households being "squeezed" proportionately more than those on higher incomes who did not receive tax credits.

The group added that taking low-income households out of the income tax net by raising the personal allowance would not necessarily make their households better off, once their loss of housing benefit and council tax benefit was also taken into account.

Meanwhile, the additional 1% reduction to the rate of corporation tax was praised by the Institute of Chartered Accountants in England and Wales as helping to support growth. But it warned that the reduction in capital allowances was likely to mean that capital intensive businesses, such as manufacturers, would be net losers.

The Association of Chartered Certified Accountants also welcomed the reduction to corporation tax, but criticised the increase to the tax on profits made by oil and gas companies.

It said the sudden change came as a shock to the North Sea oil industry, and had been "widely condemned" as reducing the competitiveness of the UK as a target for investment.

The Chartered Institute of Taxation also criticised the tax rise for oil companies, while it warned that constant changes being made to the banking levy also needed to end.