Families unfairly penalised by UK tax system, CPS report warns
The UK tax system must be reformed so that families are no longer unfairly penalised, a think tank has warned.
Couples with two children and a single earner of £60,000 will pay over £7,000 more tax than if both parents earned £30,000 each, Centre for Policy Studies (CPS) researchers found.
Research found single-earner married couples on the average wage in Britain would pay more tax here than in France, Germany, or the US – and more than the OECD average.
The centre-right-leaning think tank is urging ministers to prioritise turning the marriage allowance into a transferable parental personal allowance, at a cost of £6.1bn in a bid to slash poverty. But in the short term the CPS say government should start out by covering only those parents with children under 18, which would cost £3.6bn.
A move by the government, when it can afford to cut taxes, to create a personal transferable allowance would reduce poverty by 4.3 per cent, with one in ten households seeing a net income rise of more than five per cent and poorer families benefiting the most, the CPS said.
Ranil Jayawardena MP, chairman of the Conservative Growth Group, said: “Families should be free to keep more of their money and spend it however they want. They earned it and they should keep it. That’s why we need to reform income tax to make it family friendly.”
Tom Clougherty, report author and CPS research director, said: “Some of the greatest injustices in the tax and benefit system come from the way we treat families, especially those in which one person earns more than the other.
“Making the tax system fairer towards families – particularly those with young children – ought to be a priority for a Conservative government.”
The CPS has also urged ministers to fulfill a pledge to raise the inheritance tax threshold to £1m, branding the current system a source of “injustice and inefficiency in the face of rising inflation”.
Titled ‘Family-Friendly Taxation’, the report, written by Clougherty and Jayawardena, calls for families to be put at the heart of the UK’s tax system.
It marks the first in a series of collaboration between the CPS and the newly-formed Conservative Growth Group.
A Treasury spokesperson said: “We keep all taxes under review but introducing additional tax allowances would be expensive and add complexity to the income tax system.
“The best thing we can do to help families right now is to drive down inflation, and we have a clear plan to halve it this year, then get it back down to two per cent.
“More than 93 per cent of estates aren’t expected to pay any inheritance tax in the coming years and estates of surviving spouses and civil partners can already pass on up to £1m without an inheritance tax liability.”