Income tax likely to miss targets
The level of income tax collected is likely to miss the governments target for this financial year, even though employment has risen.
The Office for Budget Responsibility (OBR) has warned that because of low income jobs and more people being self employed, and low wage growth, their revenues will be lower that expected. 35% of self-employed people in the UK earn less than £10,000, and in the UK you can earn up to £10,000 tax free. There are now fewer revenues coming in for each new pound earned.
Robert Chote, chairman of the OBR, said:
“The Chancellor of the Exchequer gets more bang for his buck if wages and salaries rise as a result of people’s earnings going up than if employment goes up.
“If earnings go up you are taking more people into higher income tax brackets, whereas if employment is going up you are perhaps bringing in more people at the bottom. This continued story of earnings growing less rapidly than expected and employment growing more rapidly than expected does perhaps suggest that we’re more likely to be disappointed than to overachieve on income tax receipts this year.”
"We've been getting fewer pence of revenue coming in for every pound of wages and salaries that's generated. From the perspective of the public finances that's not particularly good news.
"This continued story of earnings growing less rapidly than expected and employment growing more rapidly than expected does perhaps suggest that we are more likely to be disappointed than over-achieve on income tax receipts this year."
Just over 2.2 million people in Britain are unemployed, which is the lowest rate since 2008. The current rate of inflation is 1.5%, so wages are still lagging behind at 0.6%.
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