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How Unfair Tax Thresholds Impact Almost Everyone

Something needs to change ...


Posted by Roger Eddowes on 28/05/2024 @ 8:00AM

Tax thresholds are a necessary part of the UK's tax system and while the intention is to create a fair system, the reality is that many individuals and families are unfairly burdened by these thresholds ...

Tax thresholds may seem necessary, but the reality is that they can create an unfair burden on many!

Tax thresholds may seem necessary, but the reality is that they can create an unfair burden on many!

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The UK's tax system is often touted as one of the most progressive in the world, with the intention of creating a fair and equitable system for all citizens. However, when it comes to tax thresholds, the reality is that the system can be incredibly unfair for those who fall within certain income brackets.

"Tax thresholds are the income levels at which
different rates of tax are applied!"

They are meant to ensure that individuals and families are not unfairly burdened by taxes, and that those who can afford to pay more, do so. However, the problem arises when these thresholds are not adjusted for inflation, leading to more and more individuals falling into higher tax brackets over time.

For example, the basic rate tax threshold for the 2024/25 tax year is set at £12,570. This means that anyone earning below this amount will not pay any income tax, while those earning above this amount will pay a 20% tax rate on their income. However, this threshold has remained unchanged for a number of years, despite inflation and rising living costs.

This means that more and more individuals are being pushed into higher tax brackets, even though their income may not have significantly increased!

This can have a significant impact on the average individual, especially those who are already struggling to make ends meet. As they earn more, they are pushed into higher tax brackets, resulting in a larger portion of their income being taken away in taxes. I've seen many people get stuck in a vicious cycle where they are unable to save or invest in their future, as their income is constantly being eroded by taxes.

Another issue with tax thresholds is that they do not take into account regional differences in living costs. For example, someone living in London will have a significantly higher cost of living compared to someone living in a smaller town in the north of the country. However, the tax thresholds are the same for both individuals, meaning that the person living in London may be unfairly burdened by taxes due to their higher living costs.

Tax thresholds can also have a disproportionate impact on certain groups of people, such as single parents or low-income families. These individuals may be earning above the tax threshold, but they may still be struggling to make ends meet due to their financial responsibilities. This can create a significant burden on these individuals, who may have to make difficult choices between paying their taxes or providing for their families.

I believe tax thresholds are now creating a disincentive for individuals to earn more. As they earn more, they are pushed into higher tax brackets, resulting in a smaller portion of their income being available for them to spend or save. This can discourage individuals from seeking better job opportunities or working longer hours, as the financial benefits may not be worth the increased tax burden.

"So, what can be done to address these issues and
create a fairer tax system for all?"

One solution could be to adjust tax thresholds for inflation, ensuring that individuals are not unfairly pushed into higher tax brackets due to rising living costs. Another solution could be to introduce regional tax thresholds, taking into account the varying costs of living across the UK.

Ultimately, it is important for the government to consider the unintended consequences of tax thresholds and work towards creating a fairer system for everyone. I've always felt the current system is well-intentioned, but it is clear that it is not working as intended. It is time for a closer look at tax thresholds and their impact on the average individual.

Tax thresholds may seem like a necessary part of the UK's tax system, but the reality is that they can create an unfair burden for many individuals and families. It is important for the government to address these issues and work towards creating a fairer system for all.

After all, the true measure of a fair tax system is how it impacts the average person, not just the top earners.

Until next time ...

Business Godparent


Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more of my thoughts about tax thresholds, it may be a great idea to call me on 01908 774320 and let's see how I can help you.

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About Roger Eddowes ...


Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.

Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.