Is high taxation partly responsible for trust deeds?
27th June 2011
You may not be aware but, for those on modest and high incomes, the UK has some of the highest rates of taxation in the world. Not only are they high, but they have been increasing. If you’re on a modest income of £15,000 or a fantastic salary of £120,000, you may be surprised to know that in only six countries in the world would you be paying more tax. These countries include Estonia, India and Mexico. So is this high rate of tax partly responsible for the number of trust deeds currently in circulation?
These figures have been brought to light by a recent UHY Hacker Young survey.
The effect of high taxation is a reduction in your real or ‘take home’ income. Recent changes to taxation rates and thresholds, National Insurance and VAT have together conspired to create a tax squeeze on workers in Scotland. For anyone with existing levels of debt, higher tax deductions can only make it more difficult to maintain the contractual rate of debt repayments and in some cases this could lead to the requirement for protected trust deeds.
No decision about protected trust deeds should be taken without first taking advice from a properly qualified debt or protected trust deeds adviser. If you believe that you cannot maintain debt repayments (or tax debt repayments) the adviser will work through your particular circumstances with you. This will mean looking at your debts, your income, your expenditure and any assets you may own. This information will prompt the protected trust deeds adviser to inform you about all of the options available to you and which might be most suitable in your particular circumstance.
Tax debts themselves are often included in protected trust deeds, something which is often relevant to the self-employed. Any taxation debts are looked at in the same way as other unsecured debts such as credit cards, overdrafts or unsecured bank loans. HMRC do not receive preferential treatment in protected trust deeds including tax debts. Protected trust deeds should include provision to be able to manage future tax liabilities.
A professional protected trust deeds adviser will also dispense useful tips and advice on budgeting and may help you to cut down certain areas of expenditure. If these measures help you to free sufficient disposable income to be able to manage your debts more effectively (without the need for protected trust deeds) you should probably get in touch with HMRC to discuss a repayment plan. It’s not unusual for HMRC to agree to collect tax arrears over a one or two year arrangement. Avoiding protected trust deeds makes sense if there is a practical way to sidestep one.
It’s clear that taxation is unlikely to reduce in the short-term. Anyone who is struggling with debts in general should therefore not hesitate to take advice from a reputable adviser. Anyone with HMRC tax debts may also wish to contact a protected trust deeds adviser in order that they can become familiar with the potential routes to deal with the matter.
If you would like further information on any of the above then please do not hesitate to call us and speak to one of our professional Scottish trust deeds advisers.
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