Osborne makes Christmas less merry for taxpayers
How much is your Christmas worth? According to the Taxpayers’ Alliance, it’s worth about £283 per family in tax pounds to HMRC.
That’s how much the average UK household will pay on their festive spending this year, taking the total Christmas tax bill for the country to around £7.2bn – that’s 40% more than in 2008.
The tax on drinks alone will be around £1.35bn, and with VAT set to rise to 20% next year, 2011 is likely to see a lean Christmas too.
"While Santa Claus is coming down the chimney, George Osborne is sneaking through the back door, like the Grinch stealing the presents,” said Mike Denham, a research fellow at the Taxpayers’ Alliance.
“Taxpayers will be disappointed that while they are saving for Christmas the chancellor is planning to hit them in the New Year with higher VAT. Neither of the coalition parties have any mandate for a VAT hike that they expressly said they weren't planning to introduce and that will hit poor families the hardest. The VAT hike should be cancelled."
In case you’re wondering, this is how the Taxpayers’ Alliance calculated the total tax bill of £7.2bn:
- The cost of Christmas: According to Deloitte’s long-running Christmas Retail Survey the total cost of Christmas this year will be £37bn. That works out at £1,460 per UK household, of which £365 will go on food and drink, £803 on gifts, and £292 on socialising.
- VAT: The Christmas tax principally comprises VAT and excise duties. VAT is charged at 17.5% on virtually all Christmas goods and services except basic foodstuffs and children’s clothing. We estimate that only about £180 of the average £1,460 household spend will be non-chargeable, giving an average VAT bill of £224. That is a total VAT bill of £5.7bn.
- Excise duties: On excise duties, figures from the Office for National Statistics show that spending on alcohol was £11.7bn in the final quarter of last year. We estimate that half of that was Christmas spending, which we assume will remain unchanged this year. With the average effective duty rate on alcohol currently around 23%, that implies a duty bill of £1.35bn.
- Fuel tax: On fuel tax, a survey for Travelodge showed almost 60% of British adults travel to visit relatives between Christmas Eve and Boxing Day, with an average round-trip journey of 121 miles. That totals 3.3bn miles, and since there are few trains running, most of it will be by car. Assuming an average 35 mpg (the overall fuel consumption of a mid-range Ford Mondeo), and an average two adults per car, the journeys will require 47 million gallons of fuel. With fuel tax (duty plus VAT) now at £3.46 per gallon, that means a tax bill of £163 million.
Total tax: The total estimated tax bill is therefore £7.2bn.
The accountants’ Christmas list
As an accountant, you probably already mentally calculate how much tax you’re paying on everything you purchase but in case you haven’t already done your Christmas shopping, the Taxpayers’ Alliance has supplied a handy guide showing you how much HMRC gets on your gifts and treats.
|Apple iPad with 64GB||£699||£104.10|
|Nintendo Wii Console bundle||£159||£23.68|
|"Old Time" plush Santa suit||£159||£23.68|
|Visit to Santa's Magical Kingdom, Kent (family of four)||£140||£20.85|
|Chanel No 5 Parfum 15ml||£114||£17.28|
|Lego Harry Potter Hogwarts Express||£79.72||£11.87|
|Journey to see family (average 120 miles)||-||£11.86|
|Remy Martin cognac||£30||£11.13|
|Moet & Chandon champagne||£29.99||£6.63|
|6ft Nordman xmas tree||£45||£6.70|
|Toy Story Ultimate Space Ranger Buzz Lightyear||£39.99||£5.96|
|Harveys Bristol Cream Sherry||£8||£3.44|
|John Lewis Luxury Crackers||£25||£3.72|
|Zhu Zhu Pets Deluxe Funhouse Set||£19.99||£2.98|
|Quality Street family tin||£10||£1.49|
|"Passion Pack" mistletoe||£7.75||£1.15|
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I've been a journalist for four years, writing on a wide variety of topics from business and finance to travel, culture and celebrities. I began my career as an editorial assistant for Palladian Publications, a B2B publisher specialising in technical magazines for professionals in primary industries. I later moved into consumer magazines as a...