Income rising, tax falling says report

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People living in Derry are paying less tax and earning more than before the financial crisis began according to a new report.

The report, complied by accountancy group UHY Hacker Young, says Derry is one of only seven towns and cities across England, Scotland, Wales and the north, where the proportion of tax fell and incomes rose in the years between 2006 and 2009.

The accounts studied 50 towns and cities comparing tax and income in 2009/10 to tax and incomes in 2006/7 - the year before the global economic crisis took hold.

UHY Hacker Young points out that the total number of taxpayers across the UK has declined from 31.8 million in 2006/7, to 30.6 million in 2009/10, many of whom have lost jobs. In Derry the study found that the mean tax per taxpayer in 2006/7 stood at £3350. In 2009/10 that dropped to £3280.

Rob Durrant-Walker, Tax Manager at UHY Hacker Young said between 2006/7 and 2009/10, the basic personal allowance increased from £5,035 to £6,475 (28%); for pensioners aged 65-74 it increased from £7,280 to £9,490 (30%). The basic rate of tax fell from 22% to 20%

He says Derry’s drop in tax and rise in income could be explained because of cuts to public sector jobs or because jobs fall out of the tax regime.

“Whilst public sector workers are taking hits now in terms of widespread pay freezes and job losses, they had been largely insulated in the first part of the recession from the pay austerity, enforced shorter hours, and job losses which has depressed incomes in the private sector.

“Unfortunately, it is possible that the increase in average income of those remaining is partly explained by the lower paid or part time jobs falling outside of the tax regime.”

He added:“For the vast majority of taxpayers the effective tax rate fell during the financial crisis. The tax bill for someone on a static income of £20,000 will have decreased by about 11% over the last three years. Of course, that doesn’t reflect the increase in VAT and other indirect taxes.”