Commenting on reports that the Chancellor is preparing to offer modest give-aways to families that are ‘just about managing’ (aka the JAMS), George Bull, senior tax partner at RSM said:
‘In her very first statement as Prime Minister, Theresa May directly addressed the ‘just managing’ and promised that the government would act in their interests when it came to tax. The Chancellor is therefore under pressure to respond to this commitment at the Autumn Statement.
‘The financial challenges facing the JAMS are many and varied and are not exclusively a result of the burdens placed on them by the tax system. Housing costs, transport prices and wage rates all play their part. Consequently, any changes to the tax system will only be part of the solution.
‘However, we could conceivably see a further modest rise in the personal allowance and perhaps even an uplift in the threshold for those middle earners who have been dragged into the higher rate tax threshold. A recent report from the Joseph Rowntree Foundation found that a two-person/one-earner household, with two children, could be on the verge of paying 40 per cent income tax and still be defined as being in poverty so a rise in the 40 per cent rate would therefore be welcomed by many.
‘Might the Chancellor even be bolder? The current system of income tax rates puts individuals in a very unsubtle 20 per cent, 40 per cent and 45 per cent tax bracket. There’s no reason why, with the benefits of modern technology, the Chancellor couldn’t introduce a system of say 10 rate bands running from between 20 per cent to 45 per cent. This might achieve far greater social benefits without the cliff-edge effects of the current system.’