Families unfairly penalised by British tax system, says new report

  • A new report from the Centre for Policy Studies and Conservative Growth Group warns that the British tax system is increasingly unfair towards families
  • Couples with the same overall income can end up paying dramatically different amounts of tax depending on how earnings are divided between them. A couple earning £60,000 with two children will pay over £7,000 more as a single-earner than if both adults earned £30,000 each
  • The British tax system is also much less kind to families than other comparable countries. At the average wage, a single-earner married couple with two children will pay more tax here than in France, Germany, or the US – and more than the OECD average
  • The report, co-authored by the Rt Hon Ranil Jayawardena MP, recommends that when it can afford to cut taxes, the Government should prioritise turning the marriage allowance into a fully transferable personal allowance for parents
  • A transferable allowance for all married couples would cost £6.1 billion but reduce poverty by 4.3%, with poorer families getting the greatest benefit. One in ten households would see their net income rise by more than 5%. However – in the short run – we would recommend a more affordable version, covering only parents with children under 18, which would cost £3.6 billion.
  • The report also advocates fulfilling the Conservative Party’s promise to increase the inheritance tax threshold to £1 million, again in order to make the tax system more family-friendly and address a significant source of injustice and inefficiency in the face of rising inflation
  • The report argues that in the longer term, the Conservatives need to completely rethink family taxation and childcare subsidies, drawing on lessons from France, Germany and elsewhere

The British tax system is unfairly discriminating against many families, especially those in which one person stays at home or only works part-time because of care responsibilities, whether looking after a child or caring for an elderly or disabled relative.

‘Family-Friendly Taxation’, by CPS Research Director Tom Clougherty and Conservative Growth Group Chairman the Rt Hon Ranil Jayawardena MP, makes a series of recommendations for how to put fairness for families at the heart of the British tax system, including by reforming the marriage allowance and raising the threshold for inheritance tax. The report is the first in a series of collaborations between the Centre for Policy Studies and members of the Conservative Growth Group.

Changes proposed include the introduction of a fully transferable personal allowance for married couples with children, reform of the child benefit tax change, and a longer-term recommendation for a fuller rethink of the tax and childcare system.

Taken together, the changes would end the bias in the tax system against single-earner couples, at least for those families earning less than £60,000, by allowing the earner to use all of their husband or wife’s personal income tax allowance, rather than just 10% as at present (and only for those on the basic rate of tax). 

The report acknowledges the fiscal constraints on the Government, but argues that helping families is good politics and good tax policy, and should be prioritised when tax cuts are being considered. Modelling by PolicyEngine shows that the cost of the core recommendation on personal allowances ranges from £2.1bn if limited to married couples with a child below school age to £3.6bn if it covers married couples with a child still in school or younger, with a top estimate of £6.1bn if all married couples are included.

Among other recommendations, the report also urges the Government to make good on George Osborne’s 2007 promise to raise the inheritance tax threshold to £1m, offset by rationalising existing exemptions. The ambition, though, should be to abolish IHT altogether, which the report suggests could be a powerful pro-growth move if done the right way.

Tom Clougherty, report author and CPS Research Director, said:

“Some of the greatest injustices in the tax and benefit system come from the way we treat families, especially those in which one person earns more than the other. Even at modest household incomes, one-earner families can end up paying thousands of pounds more tax than dual-earner ones. Making the tax system fairer towards families – particularly those with young children – ought to be a priority for a Conservative government. 

“We could make a lot of progress quickly by expanding the marriage allowance and reforming the child benefit tax charge. But there’s a longer term agenda here too – one that points towards a complete overhaul and simplification of the way we support families and children through the tax and benefit system.”

Rt Hon Ranil Jayawardena MP, report author and Chairman of the Conservative Growth Group, said:

Families should be free to keep more of their money and spend it however they want. They earned it and they should keep it.

‘Thats why we need to reform income tax to make it family friendly. Married couples and civil partners should have fully transferable income tax allowances, which would particularly help working-age parents with children, at often the most challenging time in a familys finances. Lets celebrate, not penalise, people who are trying to do the right thing. 

‘It is right to work towards abolishing inheritance tax too. It’s a death tax. It’s also a double tax, because it’s a tax on money which has already been taxed, and is an anti-family policy that places a significant administrative burden at times of great personal stress. It’s not fair, it’s not Conservative and it needs to go. 

‘I am delighted to be working with the Centre for Policy Studies on supporting hardworking families and look forward to future reports from fellow Members.’



  • ‘Family-Friendly Taxation’ is available to download here.
  • Tom Clougherty is the Research Director and Head of Tax at the Centre for Policy Studies and Rt Hon Ranil Jayawardena MP is the Chairman of the Conservative Growth Group.
  • For further information and media requests, please contact Emma Revell on 07931 698246 or [email protected] or Josh Coupland on [email protected] and 07912 485655.
  • The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, business, welfare, education, housing and green growth, its goal is to develop policies that widen enterprise, ownership and opportunity.

Date Added: Monday 10th July 2023