Households and businesses are crying out for tax simplification

Sian Steele, Head of Tax at wealth management and professional services firm Evelyn Partners, says that Chancellor Jeremy Hunt’s speech today included some significant tax announcements and went well beyond what we would usually see at an Autumn Statement:

“As widely expected, the Chancellor focused on freezing allowances, dragging more and more people into higher rates of tax.  This has the biggest impact when inflation is high as prices, asset values and earnings increase but the amount on which we can keep tax-free does not. The consequences of this sort of ‘stealth tax’ are becoming better and more widely understood so these moves might provoke more uneasiness among taxpayers than the Chancellor was hoping for. In particular, the freezing of the personal allowance and higher rate threshold for income tax will impact those on low and medium incomes.

“The personal allowance is less of an issue for the highest earners, for whom it starts to disappear from the £100,000 mark onwards. But for them, the threshold at which individuals pay tax at 45% has been reduced to £125,140. While it might satisfy some demands for fairness, measures like these will not go far enough towards funding the public finances gap unless economic growth comes to the rescue by boosting tax revenues – a prospect that currently looks remote. So it would not be surprising if further tax announcements arrive next year in a full Spring Budget.

“Simplicity and certainty are the key requests our clients have for the tax system. We have long heard commitments from Chancellors to simplify the tax system, but have not yet seen the root and branch reform that is desperately needed.  With the proposed abolition of the Office of Tax Simplification the drive for simplicity needs to be taken on seriously by the thought leaders in Government, the Treasury and the tax authorities.  We hope to see evidence of this at the next Budget and in responses to current consultations.”