But first, some background. A local Income Tax is a simple addition to your Tax Code based upon your home post code. So, for example, if you are an employee your Tax Code will be changed to recover the appropriate additional tax, and the self-employed will have a change to their tax assessment at the end of the year. The mechanisms are all in place - the taxman has your post code and employees will see "/s" on their coding notice if they live in Scotland but their employer is in England.
The following are the Council Tax bands for the Western Isles for 2007/08.
|Property value||Band||Council Tax 2007/08|
|Up to £35,000||B||796.44|
|Up to £45,000||C||910.22|
|Up to £58,000||D||1,024.00|
|Up to £80,000||E||1,251.56|
|Up to £106,000||F||1,479.11|
|Up to £212,000||G||1,706.67|
The level of the Local Income Tax is perhaps 3%, perhaps up to 7.5% depending upon who you believe, so I did the calculations up to a level of 10%, and compared it to the Council Tax Band.
|Household taxable |
What this shows is that if your total household income is £20,000 and the Local Income Tax is 3%, then you are better off. With a LIT of 5%, then you are better off if your house is Band D or above. With a LIT of 7.5%, then you are worse off unless you live in a Band H house.
Why does this come about?
Simple, because the Council Tax in the Western Isles is so low, a nationally set LIT will result in us subsidising the areas with the highest income and highest Council Tax. This was not what was intended, and certainly not what I gave my support to, and promises to penalise the Western Isles, again.
That's all before I can tell you a very, very easy way for the rich to avoid the worst effects of LIT.
Amended 13/4/07 to change "household income" to "Household taxable income" in the interests of clarity.