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Gift Aid And The Low Paid

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I'm just wondering if many people will end up getting stung by this little gem in the future with people just signing forms and not understanding the potential implications especially as George keeps increasing the tax threshold. I wonder if in a few years we'll see George having to rethink gift aid as too many people won't be paying any income tax. I've see the stats below which state soon nearly 50% of the population won't be paying income tax.

http://www.stewardship.org.uk/blog/blog/post/338-have-you-paid-enough-tax-to-%C3%83%C2%A2%C3%A2%E2%80%9A%C2%AC%C3%8B%C5%93cover%C3%83%C2%A2%C3%A2%E2%80%9A%C2%AC%C3%A2%E2%80%9E%C2%A2-your-gift-aid-donations

However, with the tax landscape changing significantly over the last few years, many people are no longer paying any tax at all! In fact HMRC tell us that over 40% of adults in the UK no longer pay any income tax. This is set to reach nearly 50% over the next couple of years. Why is this? Some reasons are:

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That's the beauty of VAT, a subsistance tax for the poor and a consumption tax for everyone else on top of income tax.

Dread to think what the effective rate of tax is over the 40% 'wealth' threshold actually is once you add up NI, HRT & VAT plus anything else slipped in.

I always like to think of what something costs in terms gross income i.e. how much I have to work to fund the purchase. Once you hit the 40% mark that nice new car etc starts to cost an eye watering amount when you think a run of the mill 20K motor these days may require a gross income in excess of 40K. That 40K could in theory be stuffed into a pension to become to in excess of 50K.

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I always like to think of what something costs in terms gross income i.e. how much I have to work to fund the purchase. Once you hit the 40% mark that nice new car etc starts to cost an eye watering amount when you think a run of the mill 20K motor these days may require a gross income in excess of 40K. That 40K could in theory be stuffed into a pension to become to in excess of 50K.

I had to laugh as I think the same, I didn't know anyone else had worked that out . With a marginal tax rate of 65%, I find I have to triple the cost of anything I buy to see the real cost. I've practically stopped buy anything I can possibly avoid and dump it into pension. It can wait until I'm 55 and I pull it out at 0-20%.

I heard on the radio this morning about a plan to claim back 20p in the £ for council tax dwellers with incomes over £30K (£40K in london). Only 20p, doesnt sound much..... but if you are a £50k earner with three kids, your marginal tax rate is already in the high 60%'s. This would increase is to nearly 90%. If they have graduate loans to pay back, its getting very close to 100%.

The more they mess with the system, the more stupid and distorted it gets.

P.S. If you are a 40% rate taxpayer, don't do gift aid. Just get a receipt and claim it back on your tax return. e.g. National Trust, English Heritage.

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