Thursday, 9 March 2017

talking with the taxman about the art of redirection

The budget has come and gone, with Mr Hammond somewhat stymied by his predecessor's mess and the upcoming turmoil of Brexit.

The risk profile of self-employed is higher than of those in employer based work, yet Hammond is to reduce the offsets available, with the National Insurance realignment. Unless you are a backbencher ex-Chancellor now working for BlackRock, of course.

I've been playing with the entirely synthetic national household income as a way to get a sense of outgoings. We all get one of those customised HMRC profiles which shows personal contribution to the various direct taxation categories. I decided to reprofile it for the 'all UK household' case, driven from the Office of National Statistics figures.

In practice the ONS produce a quintile (fifths) breakout of UK incomes and although the middle quintile shows an income of £33,758, I decided that the 'All Households' blend, which includes the lowest and highest in the right proportions, would give a more useful figure.

On that basis I can also see that the 'all households' lifetime tax bill has risen between 1995-96 to 2015-16 from £447k to £826k. In 2000 it was £583k. I guess that is worth a separate plot at some point.

But my original objective was to get a sense of the 'All households' contribution into various tax categories, including the EU.

An interesting read. Welfare, Health, State Pensions, Education and National Debt interest make up 75% of the tax bill. And the EU contribution? Smaller than overseas aid(1.2%), at 1.1%.

Let's convert that into the 'All households' direct tax contribution. Of the £9,514 direct tax, around £105 goes to the EU. Welfare, Health, State Pensions, Education and National Debt contribution is £7,145.

So perhaps Mr Hammond was right to leave Brexit out of his budget speech, although the 19% reduction in US dollar foreign exchange rate still takes some explaining.

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