Toy figures have to deal with taxThe Office of Tax Simplification (OTS) is looking at ways to simplify tax on savings.

The OTS is looking at the way in which savings and investment income is taxed, which can be very complicated. Its May 2018 paper states,

the interactions between the [tax] rates and allowances is sufficiently complex at the margins that HMRC’s self-assessment computer software has sometimes failed to get it right.

The complex marginal rules mean that,

many taxpayers continue to worry about the tax treatment of their savings income even when they do not in fact have anything further to pay, and there are also many specific complexities which taxpayers find difficult and confusing.

To make matters worse, the OTS also found that 95% of people do not pay 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).

Recommendations to simplify tax

The OTS paper makes several recommendations, including:

It is likely we will hear more about this 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 talk to us. Remember, even HMRC struggle to get it right. Call us on 020 8559 2111.

[highlight]The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.[/highlight]