The UK's Office of Tax Simplification (OTS) has published a report exploring ways of simplifying the taxation of individuals' savings income and identified areas where the Government needs to work harder to help personal taxpayers.
The report - Simplifying the taxation of savings income - said that parts of the UK's tax system "are complicated, difficult to understand, and can produce irregular outcomes."
Whilst the UK's tax regime offers a range of tax reliefs that encourage people to put money aside for their future needs which works well for 95 percent of people as they pay no tax on savings income, the OTS said thre were still "misunderstandings" over the tax implications of a variety of savings strategies.
Angela Knight, the OTS's chairman, said: “The UK savings tax system works well for most savers as they don’t have to pay tax on income from their savings until it is more than £1,000 a year and they can also contribute £20,000 a year to their ISAs where the income is not taxed either.
"But many taxpayers continue to worry that they will be taxed on their savings income and misunderstandings and confusion remain. This is the area, and inevitably the complexity, that the OTS considers is now the time to address.”
The report examined the taxation of interest and dividend income, ISAs, pension withdrawals, life insurance bonds and collective investment vehicles such as unit and investment trusts.
It also identifies nine areas where further work would be beneficial including a review of the various savings rates and allowances, and the interactions between them, to identify options to streamline the income tax calculation, a personal tax roadmap to clearly set out the government’s vision for personal taxation, including plans for savings income, improving guidance on the taxation of savings income, particularly on the treatment of pension lump sums and simplification of ISAs, including a review of the rules on withdrawals from the Lifetime ISA.
|RATE THIS ARTICLE|
THIS WEEK'S TOP STORIES
PAM (Private Asset Managers) and its sister website PAMonline combine to provide "...the best guide available to the leading firms in private client fund management" (FINANCIAL TIMES). PAM compares managers on a level playing field by key data such as fees and charges, minimum investment thresholds and so on.