The way savings are taxed is being reviewed by the Office of Tax Simplification (OTS) – but don’t hold your breath yet.
The OTS is looking at the way in which savings and investment income is taxed, which can be very complicated. According to its paper, published in May 2018, the complex marginal rules mean that a lot of people are concerned about how their savings income may be taxed, even if they have no further tax liabilities, with the various specific complexities of the rules being a major issue. The paper also notes that even HMRC’s self-assessment software has sometimes made mistakes dealing with the complications.
To make matters worse, the OTS also found that 95% of people do pay not tax on savings income, thanks to a combination of the personal savings allowance (£1,000 for basic rate taxpayers and £500 for higher rate taxpayers) and the dividend allowance (£2,000).
The OTS paper makes a range of recommendations, including:
We can expect to hear more, probably including the announcement of a formal Treasury consultation document, in the Autumn Budget. In anticipation of this, the OTS has already made the plea that, “it is important not to make piecemeal changes, which risk adding further layers of complexity”.
In the meantime, if the tax treatment of your own savings and investments is concerning you, do get in touch. Remember, even HMRC struggle to get it right.
|Click here to see Stephen's profile and contact details.|