Reply to post: Re: The UK Tax system is no longer fit for purpose. gears up for IR35 private sector crackdown – say industry folk

Anonymous Coward
Anonymous Coward

Re: The UK Tax system is no longer fit for purpose.

I don't think there's a strong argument for flat-rate tax. It's also politically difficult in a real democracy. It always favours the highest earners, so you'd only expect to see where there's an effective oligarchy.

A full flat rate is certainly very simple, all income can be taxed immediately at source, but it hurts everyone bar the high earners, and the poorer you are, the more it hurts. If you go for a flat rate plus a tax free allowance, then you can set that to benefit the lowest earners, but then the middle classes bear the brunt, and having 2 tiered bands is not really any simpler than our current 4.

What I would like to see is a big increase in the tax-free allowance, like double the current £11k. That would take a lot of low earners out of tax entirely, and even better, would enable the abolition of the complex and costly system of working tax credits. That does mean those with middle incomes need to pay more to take up the slack, but at least you can use tiered rates to ensure the top earners take their share of the increase too.

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