There are just over 30 million taxpayers in the UK at the moment – that’s around 46% out of the total population of the UK. While that may look like over half of the population are avoiding paying tax, that definitely isn’t the case. Children, OAPs and the unemployed don’t have to pay tax, of course. But where does your tax go? What does your tax pay for? How are the government spending it? What do you get out of it?
Most employed people pay income tax if they earn over £11,000 per year. So you’re probably wondering where it all your hard earned cash goes! It can be split into 12 categories:
- Benefits and pension: Housing benefit, public sector pensions, income support, tax credits, child allowance, social services.
- Education: Early years, schools, further / higher education
- Public protection: Defence, police / civil defence, fire service, immigration / border control, courts / legal aid, prisons.
- Government: Parliaments and council admin, European Union
- Transport: Road, railways, local transport such as buses and trams
- Industry & economy: food, farming, fisheries, research & development
- Housing: Social housing, planning and regeneration
- Recreation, sports & culture: Sports, parks, beaches, culture, broadcasting/publishing
- Waste and environment: waste disposal and environmental protection
- Overseas aid
- National debt
As you can see, there’s a lot that needs to be paid for! The government also gets money from other taxes such as beer and cider duties, betting, gaming and lottery taxes, tobacco tax, VAT on goods and services, stamp duty, alcohol duties, vehicle excise duties and a few more.
As part of government deductions, you’re also paying National Insurance (NI) if you earn over £155 per week. It currently stands at 2% of your weekly earnings that go over £827 or 12% of your weekly earnings if you earn between £155 and £827. This goes towards state services and benefits including:
- Universal Credit
- Sickness and disability allowances
- State Pension
NI contributions are designed to benefit everyone. Even if you’re in employment and under the State Pension age, there’s a chance you’ll rely on NI contributions at some point in your life whether it’s a trip to A&E, an unexpected redundancy or a sudden accident that leaves you sick or disabled.
Breakdown of where your taxes go
Income tax goes towards a number of different sectors in society. Last year the expenditure included:
- Welfare: 25%
- Health: 19.9%
- State Pensions: 12.8%
- Education: 12%
- National Debt Interest: 5.3%
- Defence: 5.2%
- Public Order & Safety: 4.3%
- Transport: 4%
- Business & Industry: 2.4%
- Government admin: 2%
- Environment: 1.7%
- Culture (libraries, sports facilities and museums): 1.6%
- Housing and utilities: 1.4%
- Overseas Aid: 1.2%
- Eu budget: 1.1%
We’ve put this in the spotlight because it’s a bit of a controversial topic. You might have heard some people say ‘Why are the government spending so much of our taxes on foreign aid instead of on people in the UK?’ At just shy of 1.2% of the total expenditure, it’s actually a much smaller amount than you think and it’s used very wisely! Some of the things overseas aid covers include:
- Lifesaving vaccines
- HIV treatment
- Mosquito bed nets
- Clean water
For example, if you earn £20,000 per year, you’ll pay £3,445 in taxes. That means you pay £31 a year in overseas aid. That’s 43 vaccines, 60 days of HIV treatment and 5 mosquito bed nets – that’s a lot of people you just saved!
Where does my council tax go?
Seen as one of the biggest household bills, apart from rent or mortgage payments, council tax is used for all sorts of local services. It usually accounts for around 25% of your local council’s income and, with exception of students and under 18s, everyone has to pay it. It goes towards a lot of important things including:
- Police and fire services
- Local library services (including the computer facilities!)
- Social services such as care homes, adoption services, dementia assistance and children’s homes.
- Parks and culture such as theatres, leisure centres, swimming pools, public spaces and art galleries.
- Water and sewage.
- Street cleaning
- Refuse collection
- Street lighting
- Road and bridge maintenance
- Schools and after-school care
- Admin such as local elections, registration services (births, deaths and marriage)
- Council housing and housing advice
As you can see, council tax covers so many services and facilities in your area. But if you disagree with the way it’s spent, you can formally complain to the Local Government Ombudsman.
We know taxes always seem to be in the news – especially when it comes to where your money is going. The amount for each sector changes every year. When the chancellor of the Exchequer announces the annual Budget he or she also announces the proposed expenditure for all of the above-mentioned things.
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