If you’re a taxpayer, your Annual Tax Summary is on its way to your letterbox very soon.
Millions of these Annual Tax Summary statements were issued from Monday, following their initial launch by the Chancellor all the way back in March 2012.
They will provide a visual illustration for around 24 million British taxpayers showing how much of their income tax and National Insurance is being spent on welfare, health, education and other areas of public spending.
George Osborne announced the initiative saying:
“I promised that taxpayers would know much more about how much direct tax they pay and how that money is spent,
“Now we’re delivering on that promise by giving 24m taxpayers a new personal tax summary. It is a revolution in transparency and it will show how hardworking taxpayers have to pay for what governments spend.”
Welfare spending represents by far the largest segment of tax revenue shown on the Annual Tax Summary breakdown, with around 24.5% of Treasury spending going on welfare payments.
However, the Annual Tax Summary breakdown does not categorise welfare spending beyond a single figure, leading to criticism that what should be ‘neutral information’ is indeed party political propaganda.
One of Annual Tax Summary breakdown examples published by the Treasury shows someone earning £30,000 a year will see their tax being spent as follows:
- £1,663 on welfare
- £1,280 to health
- £892 on education
- £822 to state pensions
- £78 towards overseas aid
- £51 to the EU budget
This is an example of an Annual Tax Summary for someone earning £45,000 a year:
It’s costing an estimated £5m for the Treasury to send out these Annual Tax Statements each year. Is it really worth it?
In addition to the missing breakdown of welfare spending, the statements do not feature VAT or other indirect taxes, so only tell part of the picture. The Shadow Exchequer Secretary to the Treasury, Shabana Mahmood, has been critical of the Annual Tax Summary statements pointing out that VAT, fuel and alcohol duty does not feature.
One potential benefit is highlighting to each taxpayer how much they are paying in tax and motivating them to take action to ensure they are paying the right amount of tax. Not paying more than your fair share of tax should be a priority.
“Not paying more than your fair share of tax should be a priority.” [tweet this]
Tax planning is an important part of the Financial Planning process; making use of available tax allowances, staying up to date with changes to tax rules and providing accurate information to HM Revenue & Customs for your annual tax return, should all be a priority.
