No changes to CGT or pension tax relief ‒ yet
The expected announcements of proposed changes to capital gains tax (CGT) and pension tax relief from the Treasury have failed to materialise, after the government published over 30 consultations and updates as part of ‘tax day’.
In previous years these taxation documents would be published alongside the Budget, but this time around the Treasury opted to publish them separately after the speech.
There had been speculation that the documents would include possible changes to capital gains tax, particularly after the Office for Tax Simplification was asked to investigate last year. It later published its own recommendations for sweeping amendments to the tax.
The relief paid on pension tax contributions was also predicted to be included in the slew of consultation documents.
It led to a host of financial observers describing tax day as a “damp squib”.
What is in the documents?
Rachel Griffin, tax and financial planning expert at Quilter, suggested that the Treasury had “focused on ‘behind the scenes’ changes to improve the administration of the tax system” rather than announce headline changes.
For example, there is a consultation on cutting air passenger duty (APD) for domestic flights. The Treasury suggested this could improve connections across the UK by boosting the number of flights and routes on offer, while higher tax bands could be introduced for longer haul flights, potentially making them more costly for passengers.
The Treasury is also looking at extending its ‘making tax digital’ programme to include self-employed workers from 2023. The programme, which has already launched for larger VAT registered businesses, requires taxpayers to make more frequent payments rather than settling their bill once a year.
Other measures included in the documents include a clampdown on holiday lets, measures to remove red tape from inheritance tax reporting, and a push to tackle tax avoidance.
A missed opportunity
Jason Hollands, managing director of Tilney BestInvest, said that ‒ for now at least ‒ the panic about sizeable personal tax raids was over. However, with the various tax allowances set to be frozen for the next five years, he noted that increasing numbers would be drawn into paying more tax anyway.
Hollands added: “This is going to become progressively more painful if inflation rears its head again as the markets are expecting. People should therefore make best use of existing allowances while they can – a timely reminder with the end of the current tax year just days away.”
And Tom Selby, senior analyst at AJ Bell, argued that while the reforms to modernise the way tax is administered were all laudable, there was a sense that this had been a real missed opportunity to tackle obvious flaws in the system.
According to Selby, these include issues like savers in net pay schemes missing out on pension tax relief and the overtaxation of those making use of the pension freedoms.