The Office of Tax Simplification (OTS) has published its report on possible changes to simplify the taxation of savings and investment income.
The Office of Tax Simplification (OTS) has published its report on possible changes to simplify the taxation of savings and investment income. The report makes several recommendations, including the ‘radical’ option of removing the differential tax rates for dividend income, but stresses that any changes should not be carried out piecemeal.
The OTS acknowledges that the current system of reliefs and allowances ‘works well for most taxpayers’, with 95% of people having no tax to pay on savings income. Nevertheless, the OTS sees the way the various reliefs and allowances interact as a source of complexity. There is greater awareness of ISAs than the personal savings allowance and the dividend allowance introduced from April 2016, which may confuse people making decisions about where to save their money.
Other areas the report highlights as being not well understood are the tax treatment of pension fund withdrawals under the new pension flexibilities, and the rules on calculating gains on either full or partial surrenders of life insurance policies.
The report suggests possible alternative approaches for simplifying savings rates and allowances. These include:
Recommendations for further work on other areas include:
See the OTS paper, Savings income: routes to simplification, at https://bit.ly/2LHabXs.
The Office of Tax Simplification (OTS) has published its report on possible changes to simplify the taxation of savings and investment income.
The Office of Tax Simplification (OTS) has published its report on possible changes to simplify the taxation of savings and investment income. The report makes several recommendations, including the ‘radical’ option of removing the differential tax rates for dividend income, but stresses that any changes should not be carried out piecemeal.
The OTS acknowledges that the current system of reliefs and allowances ‘works well for most taxpayers’, with 95% of people having no tax to pay on savings income. Nevertheless, the OTS sees the way the various reliefs and allowances interact as a source of complexity. There is greater awareness of ISAs than the personal savings allowance and the dividend allowance introduced from April 2016, which may confuse people making decisions about where to save their money.
Other areas the report highlights as being not well understood are the tax treatment of pension fund withdrawals under the new pension flexibilities, and the rules on calculating gains on either full or partial surrenders of life insurance policies.
The report suggests possible alternative approaches for simplifying savings rates and allowances. These include:
Recommendations for further work on other areas include:
See the OTS paper, Savings income: routes to simplification, at https://bit.ly/2LHabXs.