Nearly half of all working mothers are calling on the Chancellor to increase the personal tax allowance to £10,500 when he presents his Budget next Wednesday.
Asked by business advisers and accountancy firm BDO LLP what measure they would most like to see included in the Budget, 48.5 per cent of working mothers said they’d like to see the tax free personal allowance for workers rise from £10,000 to £10,500.
Richard Rose, tax partner at BDO, said: “The Liberal’s policy of continuing to increase the personal allowance would be a real fillip for the working mum. The Government would be incentivising more mums into work.”
He said he was not surprised that nearly half those polled thought that a further increase in the personal allowance to £10,500 would be the most welcome change.
“Indeed, speculation this week has been that the Chancellor will be announcing this change when he announces his Budget,” he said.
Mr Rose said BDO’s research showed that the next most popular tax change among working mothers would be a reduction in the 40 per cent tax rate, which kicks in when people earn over £41,450.
BDO said 17 per cent of working mothers said these was their chief priority.
“More and more working mums are going into the 40 per cent tax rate because the bands haven’t moved as much as inflation over the last several years,” he said.
“We’d like to see a reduction in tax breaks from 40p to 39p or 38p. This would give mums more money in their pocket.”
When the 40 per cent tax rate was introduced in 1988, just 1.4 million people paid it. That has now crept up to 4.4 million people and is expected to hit five million people next year, hitting working mothers who would previously have stayed within the 20 per cent band. Mr Rose said the other big issue for parents is the cost of childcare.
“The UK is the most expensive place in Europe for childcare. We’d like to see an allowance for nursery costs for working mothers with young children,” said Mr Rose.
Tim Parr, tax partner at Baker Tilly in Leeds, said the Chancellor is expected to give more detail on the Government’s plans for a tax-supported childcare scheme, which will replace the current voucher scheme.
He is also expecting details on the provision of nursery education.
“The new childcare scheme will be available to all working parents, including the self-employed, and is likely to have a greater impact on parents than most other tax changes,” he said.
A move that is also likely to appeal to working mothers is plans to clamp down further on tax avoiders.
Many feel that celebrities who have been caught out cheating the taxman while ordinary people have to hand over a large proportion of their earnings should be named and shamed.
Earlier this year comedian Jimmy Carr paid a £500,000 tax bill after it came out that his accountant had used a controversial, but legal, offshore tax-avoidance scheme that allows the wealthy to pay just one per cent of their earnings.
Mr Carr is now paying full corporation tax in the UK and he has apologised for using the scheme.
“The Government is keen to be seen to be taking action against tax avoidance schemes and it is predicted that individuals and companies who have used avoidance schemes will have to make payments on account of the tax ‘saved’ by using the scheme,” said Mr Parr.
“Tax will only then be repaid if and when a court determines that the scheme has work- ed.”
He said it is also likely that UK tax residents with hidden assets in the British Overseas Territories will get the opportunity to come forward and settle their past affairs with HMRC.