Graduates Could Loose Half Their Salaries To The Taxman

A new report compiled by the independent non-party think-tank Reform,has indicated that within five years University graduates will loose almost half of their salaries to tax.

The report revealed the escalating financial burdens young people face today and in the near future that the current generation of graduates are victims of an institutional bias that has tipped the balance between taxation and spending in favour of older generations. 

The report argued that while nations such as the USA are addressing their intergenerational bias, the British Government has all but ignored the issue. 

This means that Graduates are burdened by increased public spending on pensions and health services, which are indeed primarily used by the older generation.

The report calculated that a Graduate, landing a new Graduate Vacancy on an average starting salary of around £27,000 would be left with just under £14,000 a year to spend after outgoings such as tax, NI, pension, council tax and the more than likely student loan repayments.

Nick Bosanquet, a consultant director at Reform indicated that a potential solution to this issue would be to reduce the overall tax burden from the current 42 per cent to below 40 per cent, ideally in a region of around 35 percent.

Andrew Haldenby, the director of Reform, called for the introduction of a new concept for economic policymaking which would measure the funds available to individuals to spend on their own training, health care and retirement.

Mr. Haldenby indicated that this measuring could also allow more young people to save more money for essential purchases, such as a deposit on a first home. It is often reported that more and more first time buyers are relying on financial help from parents and family members, as well as borrowing much more than they can realistically afford to. This would be a great way to assist would be buyers to save a deposit.

This report said that when Gordon Brown became Prime Minister, many believed that young people would be at the top of the Government's agenda. However the latest tax reforms have helped older people disproportionately to what it helps the younger generation.

One of Gordon Brown’s early priorities was to help first-time buyers. But the recent introduction of 18 per cent rate of capital gains tax will be of more help to the older generation who own a second property. Those who do will pay 22 percentage points less in Capital Gains Tax if they sell the additional property.

Interestingly, a reduction in the basic rate of income tax from 22 to 20 per cent may appear to be of some benefit to younger people, but it has been funded largely by removing the 10 per cent tax rate, which will disproportionately affect young people on lower salaries.

The report recommended targeted tax reductions, such as a much higher personal income tax threshold of up to £15,000.

The findings in this report certainly need to be addressed, if they are not, the Graduate Jobs market could become even more competitive and demanding on candidates.