Income Tax Reform for Pensioners

 

Why is it that when you are least interested and less able to cope with complicated paperwork, on retirement, the tax office decides to cause stress and tie you up with paperwork.

At this time of life you should be spending your time enjoying life not filling in tax forms.

So let’s set our pensioners free and simplify the income tax system. Below is detailed how to simplify income tax and make it fairer for all especially pensioners.

The basic principles of this reform are:

1. The tax reform will need to be financially neutral for the Treasury. This means no extra tax is raised or redistributed as a result of the reform.
2. Every taxpayer is entitled to earn a proportion of their income tax free. This is the personal allowance.
3. Every taxpayer is regarded as an individual
4. The changes should help put more money into lower income pensioners
5. Pensioners who are higher rate taxpayers are already earning enough money and should not benefit from preferential tax systems.
6. The tax system should be simplified and reduce administration costs.
7. Tax should be fair to all.

The Proposals are:

1 Align all personal allowances.

With effect from 6^th April 2011 personal allowances will be:

Personal allowance for those aged 0 to 64 £ 7475 Personal allowance for those aged 65 to 74 £ 9940

Personal allowance for those aged 75+ £10090

You get both rich and poor pensioners as in the population in general, why just because you reach a certain age should you be able to keep more of your income.

The coalition government has also stated its intention to raise the general personal allowance to £10000.

The first proposal therefore is to consolidate all personal allowances to one at a level of £10000.

Implementation

To minimise the number of people who will lose out as a result of this proposal the 65 to 74 age allowance should be raised to £10000 and frozen at that level until the general allowance is also £10000.

The 75+ allowance should be reduced by £90 to £10000 and frozen at that level until the general allowance is also £10000. This will result in a potential loss for basic rate taxpayers of £18 per annum.

Money saved by the treasury in not upgrading and reducing the age related allowances should be used to increase the basic state pension. This should help to mitigate losers as a result of this reform. It would also help the Government achieve its objective of a universal pension of £140 per week.

2 Scrap Age Allowance Clawback

Age allowance clawback means anybody over 65 with an income over £22500 loses £1 of allowance for every £2 they receive over this limit until they reach the general personal allowance level. Quite a mouthful and a horrible technicality.

By implementing a single personal allowance for everybody (proposal 1 ) This would be irrelevant and scrapped.

3 Scrap Married Couples Allowance

At the moment the married couples (also applies to civil partnerships) allowance is available to couples who married before 5^th December 2005 if one spouse was born before 6^th April 1935.

The allowance varies between £2800 and £7295 but at 10% not the basic rate of 20%.

The allowance can be transferred and clawback applies and ends on death, divorce or separation.

Still with us. This needs a lot of thought and a bit of mathematics knowledge.

Its far too complicated and not sure why you should get a tax allowance just because you are married at all but to get it if you were born before 6^th April 1935 is a major anomaly.

However, the potential amount a recipient could lose is high at £729 and is obviously designed to target couples where the wife does not have a pension in her own right.

This allowance should be scrapped and the money saved used to increase the basic married couples state pension for couples born before 6^th April 1935..

Benefits as a result of this tax reform:

In summary aligning these existing allowances to one personal allowance will have the following benefits:

1 Major simplification of the tax system for HMRC and pensioners.

2 Reduce the cost of collecting taxes

3 Helps those on lower incomes more

4 Fairer, everyone is entitled to the same tax free income

5 Provides extra funds to boost the basic state pension and helps the government reduce the number of people claiming the minimum income guarantee and helping it implement its policy of the standard flat rate pension of £140 per week.

6 By implementing the reforms as stated above losers as a result of the changes are kept to a minimum.

If you agree with these proposals sign the government petition at

Time to cut Our Taxes

Obviously with the National finances in the state they are in I don’t mean we can cut the amount we have to pay, but cut the bureaucracy and complexity of them.

Just take a look at what is happening with effect from the 6th April 2011.

The Personal Allowance (the amount everyone can earn before they pay tax) rises from 6475 to 7475 which is £622.91 per month. Now this is a good idea. By taking small earners out of the tax net altogether you can cut the cost of collecting tax substantially and boost the income of low earners and hopefully reduce benefit dependency. This is also part of the Lib Dems policy within the coalition to raise this figure to £10,000.

However, if you earn £100K per year you lose £1 for every £2 you earn over this limit. At £114950 you get no personal allowance. Not only is this far too complicated but it is unfair. The whole purpose of the personal allowance is that everybody should be able to earn the first portion of their income without paying tax. Just do away with this by reducing the threshold for paying the 50% rate to £85000. Mathematically the same difference but far less complicated and a fairer system.

The age allowance for those between 65 and 74 personal allowance increases by £450 to 9940. Not a big problem but a better alternative would have been to freeze this allowance until it is the same as the general personal allowance. Instead the amount of money spent on this increase should have gone into the pot and used to increase the basic state pension. Again this helps lower income pensioners more.

The age allowance for those over 75 rises £450 to 10090. Again, the best option would be to freeze the allowance or just increase the allowance to £10,000, the longer term level set for the general personal allowance, and use the money it costs to increase this allowance by an extra £90 to increase the basic state pension for those over 75.

Again not only does this simplify income tax, more money goes to pensioners on lower incomes. You also get the double whammy of getting rid of another horrible technicality. Age allowance clawback which means anybody over 65 with an income over £22500 loses £1 of allowance for every £2 they receive over this limit until they reach the general personal allowance level.

In summary aligning these existing allowances to one personal allowance will have the following benefits:

1 Major simplification of the tax system

2 Reduce the cost of collecting taxes

3 Helps those on lower incomes more

4 Fairer, everyone is entitled to some tax free incomes

5 Does away with the system that small increases in income means you are actually worse off.

No to Mansion Tax

This is actually no to yet another tax and not a commentary on whether owners of properties worth more than £2 million should be paying more tax.

We already have a system of tax based on property values – the Council Tax. We don’t need to go through all that’s involved in implementing a new tax and complicating our taxes even more.

If it is decided that the mansion tax is a good idea just bring in a further council tax band at £2 million.

Can we Cut the Cost of Activity Centres

I understand the Council owns and runs 2 Activity Centres in Colchester. One in the Lion Walk Centre and the other at Abbotts Road. The last I heard they were costing the council £87,000 per year to run.

I obviously do not know the full operational or financial details of these centres, but would suggest that both venues are sold and new premises sought on a rental basis. For instance, what about transferring the Lion Walk Centre to Gala Bingo. I know from dealing with them they are quite helpful on Community Projects. Perhaps they would provide a free venue on the basis that they would make a bit from food and drink sales and perhaps offering cheap bingo for the clients.

This would make use of their facilities when they would not normally be used during the day.

Potentially the Clients would continue to benefit from a Town Centre based facility, the Council could save money and the host (Gala Bingo) would receive a small income.

If Gala Bingo were not interested there are plenty of other venues.

With regard to Abbots Road, sell the existing premises and move the Activity Centre to St Margaret's Church Hall or Old Heath Community Centre for instance. Again its a three way win. If it was moved to the Community Centre it would help to justify the large costs of setting up and running these centres which are struggling financially and to which they have struggled to find a need.

Can the Council Save a Fortune on Layer Road?

A couple of years ago just after Colchester United moved to the new Community Stadium, it was reported that the old Layer Road Ground was still costing the council $600,000 per year.

Apparently, these costs were made up of business rates and security costs. Due to the current recession the old ground cannot be sold to housebuilders for the forseeable future.

If this is the case the costs could be dramatically reduced by leasing the ground out to a Charitable Organisation who can claim a rates discount of up to 90%.

It would obviously be ideal to lease the ground to a Sports Charity, perhaps the Colchester United Trust, but if sports groups are not interested the area can be used for anything charitable.such as allotments. Obviously whoever took over the lease would have to do so on a temporary basis as the land would need to be sold at some time in the future.

The same principle holds true for other Commercial Buildings the council owns, particularly retail premises in the Town Centre. I understand for instance the council owns the large premises near the old Shoe World pending eventual redevelopment.

If the Council have trouble finding suitable Charity Groups they should contact me and I will find a suitable Charity and use for them.

Even if the Council does not save large amounts of money they should be allowing the Local Community to make use of these resources on a temporary basis.