Inheritance tax, income tax and taxes on spending and investments have been revealed to be the most hated taxes in the UK, according to findings from a survey conducted by Opinium for Hargreaves Lansdown.
The findings of the 2,000-person poll revealed that the most hated taxes in the UK are inheritance tax (named by one in four people (24 per cent), income tax (including income tax and national insurance), at 17 per cent, and tax on spending (15 per cent) and tax on investments (15 per cent). One in ten people say the most hated taxes are’ sin’ taxes on alcohol, tobacco, fuel, and sugar.
Other survey findings include: men are more likely to resent tax on spending than women (18 per cent vs. 13 per cent), women are more likely to resent inheritance tax (27 per cent vs. 22 per cent), and young people are more likely to resent tax on buying property (13 per cent vs. 8 per cent). Additional rate taxpayers are less likely to resent income taxes than basic rate taxpayers (19 per cent vs. 16 per cent); their main irritant is the tax on spending (21 per cent ).
Hargreaves Lansdown personal finance analyst Sarah Coles says: “Nobody actively enjoys paying tax, but while we’re prepared to accept some as a fact of life, others inspire deep and abiding hatred among millions of us. As the Chancellor weighs up potential tax changes in the budget, details of the UK’s most hated taxes show just how unpopular a rise would be to many of them.
“In the wake of the announcement of the increase to National Insurance, we ran a survey to see whether this change had catapulted it to the UK’s most hated tax. But our loathing of inheritance tax runs far deeper than that: it retained the title of the most hated tax in the UK.”
Only 4 per cent of people pay inheritance tax, and inheritance tax accounted for only £3.1 bn of the £334.3 bn collected in tax between April and September this year.
Coles says: “Rather than being a specific irritation with how it affects us, it’s more of an ideological resentment in many cases. People don’t like to think of the money they’ve already paid tax on being taxed again, and they want their loved ones to benefit from their legacy rather than the taxman.
“If inheritance tax worries you, you can avoid paying more than your fair share by giving your family gifts during your lifetime rather than leaving it all in your will. Not only does it have tax benefits, it also means you get to see them enjoy their gifts while you’re still around.
“You get a gift allowance of £3,000 each year that falls out of your estate immediately for inheritance tax purposes. You can also give small gifts of up to £250, specific gifts for family weddings and unlimited regular gifts from income. Outside the gifting allowances, you can make gifts of any size (known as potentially exempt transfers), and as long as you live for at least seven years after handing it over, it falls outside of your estate for inheritance tax purposes. If you die before the seven years are up, and your estate is subject to IHT, you will have to pay tax on some of this.”
According to the survey’s findings, VAT and other spending taxes mean that people are taxed on things they consider essential. ‘How can clothes be luxuries?’ asked one survey respondent.
Coles says: ”Tax on saving and investing is also unpopular. The good news is that for many people, it’s possible to avoid paying this entirely by making full use of your £20,000 ISA allowance each year. A married couple can transfer assets between them to both use their allowances and keep their tax bill to a minimum. The lowest taxpayer can then hold any investments left outside an ISA to cut the tax bill further.
“So-called ‘sin’ taxes were named as the least popular tax by one in ten people. In previous Budgets, frozen fuel taxes and cuts in alcohol duty have been popular moves, so even when the government is trying to rebalance its budget, we can’t rule it out. Alcohol duties raised £6.6 bn between April and September this year, so the Chancellor may not want to dent that income too badly. However, if it’s enough to tempt us back into the pub to raise a glass to lower prices, then the cut could help boost the tax take.”