The View from No 50





July 2017


K P Bonney & Co

Chartered Accountants and

Chartered Tax Advisers

50 Cleasby Road  Menston

Ilkley  LS29 6JA

Tel:  01943 870933

Fax:  01943 870925






Going into the general election the Conservatives, Labour, the Lib Dems and the SNP all agreed we should pay our fair share of tax.


Yep.  We all like the sound of that.


So here is the challenge.  How much is a fair amount of tax to pay on a given amount of income?


Let’s suppose we have an income of £22,000.  What do you suggest is a fair amount of tax to pay on that?  Here are some suggestions.


















Should all individuals pay the same amount of tax on the same amount of income?


Does it follow that paying the right amount of tax is the same thing as paying your fair share of tax?


There are several ways in which we could have an income of £22,000 and still pay no tax.  For example, we could have worked hard and put all our savings into ISAs over the years.  We are now an ISA millionaire.  All income from ISAs is free of income tax.  We could also have a combination of pension or salary income and dividend and savings income.  The right combination produces a tax liability of nil.


If our £22,000 is made up exclusively of dividends our tax bill is £412.



If our £22,000 is made up of interest income our tax is £900.


Rental income or pension income - £2,100.


Profit from self-employment - £3,493.


Salary - £3,761.


All of the above are examples the right amounts of tax.


The point is you can only legislate for the right amount of tax.  You cannot legislate for a fair amount of tax because few individuals will agree on what a fair amount of tax is.


I submit that we have these very differing right outcomes because successive chancellors have tried to be fair.


Whether they have succeeded is for each of us to decide.


Campaigning for fairness in tax is easy.  Implementing a fair tax policy is always going to be problematic.





Andrew Hubbard, the editor of Taxation Magazine, wrote the following in his ‘This Week’ column recently.


Last weekend I was enjoying a pleasant afternoon tea with friends and family when the subject of tax came up.  It wasn’t me who mentioned it: I know better than that!  The conversation got me thinking.  Everybody around the table was intelligent and educated.  None of them had complicated financial affairs and, as far as I know, nobody was in the mega-rich category.  Everybody understood the need for taxation and none of them had any intention of doing anything other than paying their dues.  Yet the thought of interacting with the tax system filled them with dread.  They would do everything possible not to have to engage with HMRC unless they had to.  This is not an aversion to paying tax – just dealing with the practicalities.”


“Why should this be?  Nobody relishes dealing with their tax affairs, but should the prospect really fill people with horror?  I think there are two reasons why it does.  First, the complexity of the tax system – if educated people who are capable of managing their own finances find it impossible to understand their tax position something is wrong.  But second, the experience of dealing with HMRC is in general not a happy one.  It is not so much the advice and help people receive when they speak to somebody who understands their question but the process of getting to that point which can be so frustrating.”


This struck a chord with me.  I find it is increasingly difficult to interact with HMRC.  And on the odd occasion when I have to advise a client to make contact directly I just know they are going to have a horrible experience.


As I quipped only recently, if HMRC were a supplier in the private sector we would have taken our business elsewhere a long time ago.  Unfortunately for all of us, HMRC holds the monopoly.


The running down of HMRC by successive governments has reached the point where we are all starting to suffer in our day to day lives.





We are now in the season for filing 2016/17 tax returns.


2016/17 is the first year in which banks and building societies pay interest without deduction of tax.  So does that mean millions of us are going to have to pay tax on our interest income?  Fortunately not, as there has been put in place something called the personal savings allowance.


Basic rate taxpayers can receive up to £1,000 of interest without having to pay tax on it.  Higher rate taxpayers can receive up to £500.


So what should we do if we received more interest than our personal savings allowance?


We might still be OK if our interest income does not exceed £6,000 and our total income does not exceed £17,000.  In these circumstances we are sheltered by something called the starting rate.  The starting rate happens to be 0%.


But if these all these measures don’t cover our interest income we are going to have to pay tax on some of it.  And we can’t leave it to HMRC to take the initiative.  We are responsible for notifying HMRC that we have a liability.


So how do you notify?


On its website HMRC advises that if your interest income does not exceed £10,000 you should ring the income tax helpline on 0300 200 3300.  They will make an arrangement with you for the payment of the tax on your interest income.


If your interest income exceeds £10,000 you should complete a self-assessment tax return.  If you have filed a self-assessment tax return before, you will know your unique taxpayer reference number and you can start your return straight away.  If you haven’t filed a self-assessment tax return before, you will need to register.  You can register on the HMRC website.  You must do so by 5 October 2017.


A new client of mine, for whom I am not yet recognised as his agent, rang the above number recently.   From the menu of options presented, none, he said, allowed him to speak to a human being.  He duly put the phone down.


I refer you to my article above.





Do you pay a subscription to a professional body?  If so, your subscription could be tax deductible.  HMRC has updated its list of approved professional bodies recently.  Here it is




Brenda and Terry are going out for the evening. The last thing they do is put the cat out.

The taxi arrives and as the couple walk out of the house the cat shoots back in.

Terry goes back inside to chase it out. Brenda, not wanting it known that the house is going to be empty, explains to the taxi driver, 'My husband is just going upstairs to say goodbye to my mother.'

Several minutes later, an exhausted Terry climbs into the taxi saying, 'Sorry I took so long.  The stupid idiot was hiding under the bed and I had to poke her with a coat hanger several times before I could get her to come out!'


Copyright:  K P Bonney & Co LLP 2017.  All rights reserved.  No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers.  Disclaimer:  The publishers have taken all due care in the preparation of this publication.  No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publisher.

Back to the home page