In a world where we try very hard not to discriminate between men and women – and observing that many individuals choose not to identify with either sex – it is right to ask whether the UK tax system has moved with the times. Does it matter whether you are male or female?

The short answer is yes, we have moved closer to equality, but we are not there yet. While the content of the legislation itself appears to tax the sexes equally, the impact is not felt equally because biology and life choices affect men and women differently.

Being a modern Tax Faculty, we approached our research for this article by posing the question to ChatGPT. Its answer began well with: “Tax policy has evolved over time to address gender-related issues and promote gender equality.” It dealt with the historical and well-documented changes of the early 20th century and picked up on independent taxation introduced in 1990. It also realised that other, broader, factors were relevant to a gender-neutral tax system, such as parental leave, gender pay gap reporting, automatic enrolment in workplace pensions and universal credit. 

However, it wasn’t able to reflect some of the issues that those who have worked in tax for years would reel off – probably because tax policy is a complicated and largely non-intuitive beast, which takes practical experience to appreciate. 

The dark ages for women

Since 1870, married women have been allowed to be the legal owners of the money they earn and to inherit property. However, once married, a wife’s ability to inherit further was limited. It took more than 50 years before the Law of Property Act 1922 made it possible for a husband and wife to inherit each other’s property and to inherit the property of intestate children equally. 

Equality was, however, still a long way off. Once married, a woman lost her responsibility to pay tax. Instead, her income was taxed as her husband’s. This wasn’t necessarily beneficial for the man’s tax affairs, however, because higher total income could lead to him paying tax at higher rates. 

To underline the male bias, until relatively recently, tax law was even written by referring to ‘he’ as the taxable subject in legislation.

In the 1920s, in spite of progress made by the suffragettes, women were still second-class citizens financially. 

In the 1980s, married couples were still being taxed as a single unit on which the husband was responsible for the tax, but times were changing. Eventually, in 1990, independent taxation was introduced.

Avoiding discrimination

Today we try very hard to avoid discrimination. When a new tax policy decision is announced in the Budget, it will be accompanied by a tax information and impact note (TIIN). This has a section that considers who or what might be affected by the policy, for example, specific individuals, households, families and types of business. So, whether you are a man or a woman should be a factor. However, the challenge is to consider the change sufficiently broadly to spot where the outcome won’t be what was intended. 

VAT on sanitary products

On 1 January 2021, the ‘tampon tax’ was finally abolished and a zero rate of VAT now applies to women’s sanitary products. The question we must now ask is: have women benefited? Sadly, shelf prices have not been brought down by the expected 20/120, so one can only presume that others – perhaps retailers – have benefited instead. This well-intended policy change has not reached its target.

Tax relief for retraining

The rules governing tax relief for retraining will affect anyone who needs to pay for a course to learn a new trade. While this can affect anyone, many women will consider a change in direction after a career break as their children become independent. The cost is unlikely to qualify for tax relief.

Cliff edges

Most problems occur where there is a cliff edge in the system. Limits frozen in time magnify the impact of these.

Since first proposed in 2013, ICAEW has been very clear about its position on the high income child benefit charge (HICBC). So, where the income of any individual in a household is over £50,000, a limit unchanged in 10 years, and either that person or someone they live with receives child benefit, then the HICBC applies and child benefit is clawed back through the tax system from the individual with the higher income. 

Often it will be the mother who claims child benefit and the father who has to pay it back through the charge. They need not be married and the child may not be his. Consequently, the couple may decide it isn’t worth the mother claiming child benefit at all. Not only does this deprive many women of a small source of money of their own, and so some independence, but also has a potential impact on their state pension entitlement as claiming child benefit triggers entitlement to national insurance credits. Thankfully, it was announced on tax administration and maintenance day in 2023 that the government will address this issue to enable affected parents to receive a national insurance credit retrospectively.

This policy clearly affects women far more than men, but can work the other way round too. There is some well-intended logic to linking a child benefit claim to pension entitlement, and it is possible to protect the state pension entitlement of these women/men, but few were aware of the problem and solution. It is non-intuitive apples and pears to most people with a discriminatory outcome.

Freezing thresholds is likely to have a greater effect on lower income earners of which there are more women than men. 

Our ChatGPT research did refer to gender pay gap reporting, noting: “While not directly related to tax policy, the introduction of gender pay gap reporting requirements in the UK has shed light on gender disparities in earnings. … This has sparked broader discussions about policies and measures to address gender imbalances in pay and opportunities.” 

But it was unable to link this information to specific tax policies. As AI continues to learn, doubtless this will change, but for now, even it struggles with the complexities of our tax system.

The March 2021 Budget froze the personal allowance and higher-rate thresholds of income tax at 2021/22 levels until April 2026. At Autumn Statement 2022, the freeze was extended by two more years making the real value of the personal allowance in 2027/28 equivalent to its 2013/14 level. More low-income earners will be paying taxes.

The way forward

There is a solution to this, but it does require those who develop policy to listen. Be clear about the goals and if gender equality is an underlying requirement look for unintended consequences. Think laterally, and allow enough time during consultation to refine the policy. A change in direction, where needed, might achieve the same thing.

Anita Monteith, Head of Taxation Policy, ICAEW