Taxes and benefits

The tax and benefit system has undergone significant reform since 2010, with large cuts to working-age benefits, a rise in the main rate of VAT, increases in the rate of the state pension, and reductions in direct tax, including a big rise in the income tax personal allowance. In this briefing note we investigate the impact that these reforms have had on household incomes.

The Labour Party plans to increase income tax for individuals with annual taxable incomes over £80,000. Under the current system, income tax is payable on incomes above the personal allowance of £12,500 a year. The 40% higher rate becomes payable at £50,000, and the 45% additional rate kicks in at £150,000. Labour would introduce a new 45% income tax rate starting at £80,000 a year, and a new 50% rate starting at £125,000, from 2020–21.

While the benefit system has undergone substantial reform over the past 10 years, there remain significant changes due to take place over the next parliament.

In the aftermath of the global financial crisis and associated recession, government borrowing soared to more than 10% of national income. Borrowing has since been reduced through a combination of net tax rises, cuts to the generosity of the working-age social security system and cuts to public service spending. In this briefing note, we provide an overview of what has happened to each of these areas since the crisis, highlighting where (and when) the spending cuts have fallen, and consider the long-term outlook for the make-up of public expenditure.

With taxation set to be a central policy battleground in this election, the IFS today sets out some essential factual background.

Owner-managed businesses are a fast growing group; how they respond to tax is central to the challenge of how to tax labour relative to capital incomes.

The taxable income elasticity is a key parameter for predicting the effect of tax reform or designing an income tax.

This paper provides new evidence on the incidence of rent subsidies.

The IFS Green Budget 2019, in association with Citi and the Nuffield Foundation, is edited by Carl Emmerson, Christine Farquharson and Paul Johnson, and copy-edited by Judith Payne. The report looks at the issues and challenges facing Chancellor Sajid Javid as he prepares for his first Budget.

Soft drink taxes have been implemented in 50 jurisdictions (as of August 2019). We review the evidence on their effects, summarising 27 studies of taxes in 11 jurisdictions.

Do tax systems distort firm-to-firm trade? Using data from both firms that do and don’t pay VAT in West Bengal in India, this paper shows that they can have significant effects, contributing to highly segmented supply chain networks.