Battling back from COVID-19 – new research shows*:
• Over three-quarters (77%) of UK workers are willing to pay extra income tax to fund the COVID-19 response
o On average UK employees would accept paying 3.9% more income tax
o Almost a fifth (19%) willing to pay extra 5% or more in income tax
o Less than a quarter (23%) say they are unwilling to accept any rise in income tax
• Majority of Brits agree Government was right to borrow more to get the UK through the COVID-19 crisis and accept we all have a responsibility to contribute
o Two-thirds (67%) agree we all have a responsibility to contribute
o 7-in-10 say Government was right to increase borrowing during the crisis
o 63% of respondents accept tax rises are a necessary evil to come from the situation
• Measures targeting dividends and capital gains most popular revenue raisers
o Over a third (37%) list dividends and capital gains as ‘most acceptable’ options for higher taxes
o Pension cuts less popular among respondents, with removing the state pension triple-lock (10%) and restricting pension tax relief (9%) the least favoured options
o The vast majority (85%) would rather pay lower amounts over a longer period of time, than large amounts over a shorter period of time
Tom Selby, senior analyst at AJ Bell, comments:
“Battling back from COVID-19 is going to be a long hard journey. As the UK Government eases lockdown restrictions and state support for the economy is slowly scaled back, debate will inevitably pivot towards how the near £300billion black hole in public finances should be filled.
“While the Coalition Government opted for public spending cuts to tackle the deficit after the 2008 financial crash, Prime Minister Boris Johnson is reportedly reluctant to follow a similar path. If this is the case then tax rises will likely be necessary to help balance the books – and Brits appear ready to do their bit.
“Over three-quarters of UK workers say they would accept paying more income tax in order to fund the COVID-19 effort. On average, workers are willing to pay almost 4% more than they do at the moment.
“While policymakers will need to be careful not to stifle an economic recovery by hiking income tax rates too much, there appears to be general acceptance that the COVID-19 costs will need to be repaid and that tax rises are therefore a necessary evil.
“Given battling this pandemic has required a collective effort, it would make sense for all of us to help foot the bill. Indeed, this may be one of the few times in history where a Government could hike income tax – perhaps via a time-limited COVID-19 surcharge – without necessarily wrecking their election chances. Interestingly, it seems that most people (85%) would rather pay lower amounts over a longer period of time, rather than higher amounts over a short timeframe.”
Few support pension tax relief cuts
“Although most people accept the Treasury will need to raise funds via the tax system to pay for COVID-19, there is significant disparity in the appeal of various different measures.
“Increases in dividend and capital gains tax were the most likely to be deemed acceptable by respondents, followed closely by rises in income tax. Just over a fifth (22%) believe inheritance tax should be in the Chancellor’s crosshairs, while 21% backed a National Insurance increase.
“However, when it comes to pensions the public is sending a clear ‘hands off’ message to the Chancellor. Only 1-in-10 say they would accept scrapping the state pension triple-lock as part of the pandemic response, while just 9% opted for scrapping pension tax relief.”
*Research conducted by AJ Bell and Opinium between 22/05/20 – 26/05/20 with 2,001 respondents
Survey results:
Q1: Government borrowing is increasing substantially to get the country through the COVID-19 crisis. Thinking about potential tax increases to help repay this debt, to what extent do you agree or disagree with the following statements?
|
We all have a responsibility to contribute |
Tax increases are a necessary evil to come from the situation |
There is no other way to pay the debt other than tax increases |
The government were right to borrow so much in order to get us through the crisis |
|
|
Strongly agree |
23 % |
20 % |
15 % |
29 % |
|
Agree |
43 % |
44 % |
33 % |
40 % |
|
Neither agree nor disagree |
24 % |
24 % |
31 % |
23 % |
|
Disagree |
6 % |
8 % |
14 % |
6 % |
|
Strongly disagree |
3 % |
5 % |
7 % |
2 % |
Q2. Which changes in taxation would you find most acceptable in order to repay the country’s COVID-19 debts?
|
Increase in dividend tax (dividend is a sum of money that a company may pay out to someone who owns shares in the company, i.e. a shareholder) |
37 % |
|
Increase in capital gains tax (a tax you pay on a portion of the profit – or capital gain - you earn from the sale of various chargeable assets, including property or land that’s not your main residence.) |
37 % |
|
Increase in income tax |
33 % |
|
Increase in Inheritance Tax |
22 % |
|
Increase in national insurance |
21 % |
|
Increase in VAT |
16 % |
|
Increase in stamp duty |
14 % |
|
Removal of the state pension triple lock |
10 % |
|
Restriction of pension tax relief |
9 % |
|
None – I don’t feel any change to taxation would be acceptable |
21 % |
Q3. If you have to pay more tax to help repay the country’s COVID-19 debts, would you prefer to be taxed in small amounts over a longer period of time or higher amounts over a shorter time frame?
|
Lower amounts over a longer timeframe |
85 % |
|
Higher amounts over a shorter timeframe |
15 % |
Q4. How much extra income tax would you be willing to pay to help fund the COVID effort? This would be on top of what you already pay.
|
0% - I would not be willing to pay any additional income tax |
23 % |
|
1% |
21 % |
|
2% |
19 % |
|
3% |
11 % |
|
4% |
8 % |
|
5% |
12 % |
|
10% |
4 % |
|
20% |
1 % |
|
More than 20% |
2 % |
|
Average (%) |
3.9 |
