Thursday, 27 October 2016
I have been rather amused by the sudden realisation by the middle class of Jersey that their so wonderfully effective and efficient low taxing government is costing them more in tax than if they lived in the UK. It has long been thus for some lower earners. Actually it has also been the case for many who save and invest personally too - if they had taken advantage of the UK's (now defunct) PEP's and still going ISA's. There are indeed a few who have amassed a tax free million pot. See How to be an ISA millionaire Even at the FTSE100 dividend yield of around. 3.5% that's £35,000 income tax free. Of course Jersey has no equivalent to these tax efficient saving and investing schemes
For lower earners the problem is the Jersey government's inability to comprehend that increasing tax thresholds don't help those who fall somewhat below the thresholds. In the UK many equivalents of child allowances etc are credits - paid items, not exemptions. In effect they boost income rather than allow a reduced tax bill. It makes a difference because of course in Jersey once you are a 0 rate tax payer that's the end of the benefit. So if like me your income is below the thresholds by more than a child's allowance, that allowance is worthless. That situation does not occur in the UK where tax credits are paid.
Nor is it the case that such people will be cushioned by having social security benefits. The ability to claim those is quickly eroded by the impact of capital the potential claimant may have. And this is not just theoretical stuff.
Each government department in Jersey has a different perception about what is and isn't in need of assistance. Equally each appears to think any income or assets you might have can be applied to offset any help you might get from their department alone. You can lose several times over as the same capital or income is used against you by each department that might otherwise help. It is a fine example of the inconsistent approach of a piecemeal non-system without any common coherent thinking. It is unsurprising given we elect individuals who have between them no coherent strategy and each policy is a cobbled together compromise of individualist foibles and interests. There is no plan or design or underpining philosophy here.
Thus it is quite possible to be in the situation I find myself. No income tax, health charge or care charge to pay because our income falls way short of the threshold in marginal taxation. Since I am not an employee I don't pay class 1 social security. I am theoretically liable to play full class 2 social security ( ~£6,000 per year!), but even they have realised you cannot get blood from a stone. Asking people with income significantly below the tax threshold to pay that sort of money is madness. So I have an exception. Of course I'm not entitled to most benefits and not building my pension contribution.
You might have the picture from the foregoing that we are not exactly rolling in it. But the Education Department would disagree. If either of my bright children want to go to university in a few years time I am, according to them, so well off that we wouldn't get a penny in help with the living costs or tuition fees.
I'll leave it to you dear reader to figure out the logic of how you can be so poor as to not be liable for tax or social security payments but simultaneously be so well off you can be expected to find £60,000 plus for each child to go to university.