We all hate these hidden taxes!
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These 10 sneaky 'stealth' taxes cost Brits over £75 billion each year.
Britain's tax system is unbelievably, amazingly, fantastically complicated. As proof, the 'Red Book 2011/12' guide to UK taxes is over 10,000 pages long and spread across six volumes and one index volume.
Of course, we are all familiar with the big, well-known taxes that gobble up lots of our money, such as income tax, National Insurance and VAT (Value Added Tax). Together, these three headline taxes will generate almost £350 billion of expected government takings of £577 billion this tax year.
However, there are hundreds of lesser-known taxes that go towards the enormous cost of this country. Here are 10 of these sneaky 'stealth' taxes that, together, take tens of billions of pounds from our pockets each year. I have listed these taxes from largest to smallest, based on projections for the 2011/12 tax year from the Institute for Fiscal Studies.
1. Fuel duty
Of all the UK's stealth taxes, fuel duty (on petrol and diesel) is the largest. This tax on driving is expected to raise £29.8 billion. A litre of diesel costing 145p at the pump includes about 87p of taxes, or 60% of its total cost. What's more, fuel duty is to rise in August by 3.02p per litre. Ouch!
2. Alcohol duty
In Britain, we pay alcohol duty on spirits, wine, beer and cider -- the stronger the drink, the higher the tax. For the strongest spirits (those above 40% alcohol by volume), most of the retail price consists of duty. Alcohol duties come to £9.4 billion.
3. Stamp duty
Stamp Duty Land Tax (SDLT) is charged on UK property and land transactions. It is paid by the buyer, and ranges from 0% on properties sold for up to £125,000 (£250,000 for first-time buyers before 25 March) to 5% on sales valued above £1 million. Also, there is stamp duty of 0.5% levied on shares and securities bought via the stock market or stock brokers.
Together, these two duties bring in £9.1 billion.
4. Tobacco duty
Thanks to three separate taxes on tobacco, duties account for five-sixths (83%) of the retail price of a pack of 20 cigarettes. In other words, a pack of coffin nails costing £7.20 includes £6 of tobacco duty and VAT. Tobacco duties will raise £8.4 billion.
5. Vehicle Excise Duty
Since April 2010, the cost of Vehicle Excise Duty ('road tax') for new cars is based on CO2 emissions and fuel type. The least-polluting vehicles pay no VED, but cars in the top band pay £1,000 a year. VED is forecast to be £6.6 billion.
6. Air Passenger Duty
Air Passenger Duty (APD) is a duty charged on passengers flying from UK airports. There are eight different bands of APD, based on four destination bands and economy and premium class. These rates of APD vary from £24 per person to as much as £170 for long-haul flights. APD will raise £2.8 billion.
7. Insurance Premium Tax
Insurance Premium Tax (IPT) is a tax on general insurance premiums, but not life insurance premiums. The standard rate is 6%, but there is a higher rate of 20% for travel insurance and some extended warranties. IPT will contribute £2.7 billion to the government's coffers in 2011/12.
8. Capital Gains Tax
When you make profits from selling shares, property (not your family home) and other assets, you may have to pay Capital Gains Tax (CGT) on these gains. However, each adult has a yearly tax-free CGT allowance (currently £10,600) so most Brits don't pay CGT. Even so, it is expected to raise around £2.2 billion.
9. The National Lottery
The National Lottery has frequently been described as 'a tax on people who are bad at maths'. This is because it pays out only 50p in prizes for every £1 staked. What's more, 12% of lottery revenues go to HM Treasury, which pocketed nearly £700 million from Camelot in 2010/11. Adding in another £1.5 billion of other betting and gaming duties gives total gambling taxes of £2.2 billion.
10. Inheritance Tax
Inheritance tax (IHT) is charged at 40% of the value of your estate at the time of your death. However, the first £325,000 of your estate is taxed at 0%, with this nil-rate band doubled to £650,000 for married couples and same-sex Civil Partners. Although there are dozens of legal ways to dodge IHT, it will still raise £1.9 billion.
Our £75 billion bill
In total, these 10 stealth taxes add up to a whopping £75.1 billion this tax year. This comes to nearly £2,900 for each of the UK's 26 million households. Furthermore, these 10 hidden taxes account for more than an eighth (13%) of total government revenues in 2011/12.
Finally, stealth taxes -- especially those on spending -- are regarded as 'regressive'. This means that they often hit the poorest members of society hardest. Even so, politicians seem to favour ever-higher 'sin taxes', so we should expect duties on drinking, smoking, gambling, driving and flying to keep rising steeply!