By James Andrews, 17/04/2009 00:00

Our most hated taxes and what we hope happens to them

"In this world nothing is certain," said Benjamin Franklin, "except death and taxes."

And it's only natural that we should do all we can to put off or minimise the impact of both of these malign influences on our lives.

But not all taxes are equal, certainly in how the public perceives them, so here at MSN Money we've been trying to discover what the most hated tax in the UK is and what you think should be done about it.

What we hate the most
As far as the British public is concerned, the two taxes that really drive them up the wall are council tax and fuel duty.

A distance behind them comes income tax, followed closely by inheritance tax.

Stamp duty, something that has been the subject of high-profile campaigns by the property industry, the media and opposition parties is the next most hated tax, with road tax on its tail.

So what are these taxes, how much are we spending on them and what can be done?

Council tax
All residents must pay council tax to their local authority, with the amount varying depending on the value of the property.

The average council tax bill is now above £1,400 for a Band D home - small fry compared with the amount we spend on VAT, national insurance or income tax. But it's not the amount of money that is charged that annoys people the most.

David V.G. described it as "a tax with no justice", adding: "There is no interest in whether there is enough income to pay it. One week's pension each month goes to council tax. It should be funded centrally as in Spain. It is minimal in Australia and, if you rent, paid by the proprietor."

As for what should be done about it, the Liberal Democrats proposed a local income tax. This would only tax the people who earned money, based on how much they made. It would also mean local authorities didn't have to administer the tax themselves (saving about £600 million a year, the Lib Dems calculated), be more transparent, and would rise naturally with earnings meaning there would be no annual increase when the bill arrived.

The Conservatives proposed giving pensioners a rebate of up to £500 ahead of the last election - David Cameron has also proposed that councils will have to submit their plans to a local referendum if they want to hike bills.

Fuel duty
This is charged on oils, including road fuels, such as petrol and diesel. The rates are decided annually by the chancellor.

Fuel duty currently makes up 54.19 pence of the price of every litre of unleaded. Then you have to add VAT on top. All of this means that at the pumps only about 30 pence a litre goes on the actual petrol, with the rest all going to the government.

"I hate this with a passion," PJM1974 wrote. "Why? Well, petrol is now £1.09 a litre at the BP station down the road. More than 70 pence of that cost is tax.

"We're continually being told that carbon emissions damage the environment, however our public transport costs are even more expensive than driving and if the train I took home from work today was any yardstick, woefully unpunctual. The government has us over a barrel, driving is still the cheapest and most convenient means of transport, even though the cost per litre has increased by an outrageous 310% since 1993, most of which is down to fuel duty increases."

And it's not only the cost to private motorists that annoys people.

"Fuel tax has so big a knock-on effect that the government are rubbing their hands together at every turn," PatrickDavidson commented.

"You need fuel to transport food, produce etc - so up goes the cost of buying these items and staying alive. Not quite on breathing but near enough."

As for what can be done, ViviB suggested: "Tax on emissions in the form of higher taxes for gas guzzlers."

Income tax
This is the government's primary source of revenue. It's a percentage of how much you earn as well as some types of unearned income - such as interest on savings - less certain allowances and deductions.

It brings in an astonishing £158 billion a year, enough to buy every house in Liverpool and Edinburgh put together. But why is it there?

"I do the work, which can be laborious, tiresome and stressful. Why should I then give a whopping 20% away to the government?" asked Mathfan.

"It is not even a permanent tax, it has to be renewed periodically as it was only issued back in the 1700s as a quick way of raising revenue for the King's foreign wars. It was only ever meant to be temporary!! Then for the pittance we are allowed to keep for ourselves, everything else is taxed - so in essence we are double taxed for everything! I wouldn't mind paying any other taxes but whatever I have earned, I should have the right to keep!"

Unfortunately, there is no simple way out for this tax.

If we want to keep funding schools, pensions, the police and fire services and social security we cannot simply scrap it - but there are other ways of collecting it.

Flat taxes - where everyone pays the same amount with a large initial exemption of around £10,000 to £15,000 - have been applied in a number of countries (starting with the former Soviet republics in central and eastern Europe) with a fair degree of success. The Conservative party looked into bringing one to the UK should they gain power in the early days of David Cameron's leadership of the party, but then rejected the idea.

At the other end of the scale we could "squeeze the rich until they squeal" to paraphrase former chancellor Denis Healey - and give the money to the rest of the population.

Inheritance tax
Inheritance tax, or death duty, means beneficiaries of an estate must pay 40% tax on all the assets passed on by someone after an initial exemption (currently £325,000).

Past rises in house prices mean many more people are now paying the tax and that makes people angry.

"Inheritance tax is the worst tax," s_class. "At least, theoretically, national insurance pays for healthcare, road tax pays for the upkeep or our roads, but inheritance tax is just an excuse to take a large cut of someone's life earned assets for no apparent purpose, and to be used for whatever the government wishes. That is a crime."

There are various schemes proposed to change inheritance tax. One is to make your main home exempt, another to link the amount made exempt to house prices, so more and more people are not caught in it every year.

The Conservatives proposed increasing the threshold to £1 million, the Lib Dems propose a £500,000 threshold. Labour has announced plans to count a married couple's legacy together, meaning you could inherit £650,000 from your parents before being taxed.

Stamp duty
This is charged on certain transactions, such as the transfer of property ownership or certain share sales.

The charge is a percentage of the total purchase value within set limits. For property, stamp duty is 1% of the purchase price for homes worth between £125,001 and £250,000; 3% of the purchase price for homes worth between £250,001 and £500,000; and 4% of the purchase price for homes worth more than £500,000.

The government temporarily suspended stamp duty for all homes up to the value of £175,000 last autumn.

MSN Money user ncp: "Stamp duty for me [is the worst tax]; or rather the rate at which it's levied. 3% of the entire value of a £250,000 home, hardly enough to buy a modest three-bedroom semi in many parts of the country, is nothing short of legalised state theft; theft from the ordinary 'hard working families' that this pathetic shambles of a government likes to pretend it supports.

"The £7,500 is bad enough; consider that it comes from already heavily taxed net income and it can be regarded as nothing short of scandalous."

The Lib Dems propose to make stamp duty more progressive - cutting it on lower value properties by increasing it on very valuable property. The Conservatives would raise the lower threshold of the tax to £250,000.

But our users would go further.

"I think that chancellor Alistair Darling should do us all a great favour and abolish stamp duty altogether, it would be the best move of his political career, and give us all a great chance to get on the property ladder...at last," DavJTar wrote.

Road tax
Correctly called vehicle excise duty, this is an annual tax charged to use public roads, paid by vehicle owners. Since 1998, road tax was calculated in a series of bands, based on engine size or CO2 emission ratings.

But coming on top of fuel duty and VAT on fuel, people resent paying even more to run a car.

"The 'road fund licence' is another fraud," Negger commented. "It long ago ceased to be about funding road building and motoring needs and has been raided to fund general government spending for many years.

"The name was quietly changed to 'vehicle excise duty' a few years ago which more accurately describes its purpose, but I don't recall having a vote to do away with the old Road Fund," they added.

What do you want the chancellor to announce in the Budget? Have your say here