With just days before the budget on March 16, Smith & Williamson, the accountancy, investment management and tax group who have an office in Salisbury, are proposing a series of tax measures which, taken together, would give a much-needed boost to business and the economy, simplify the tax system and appeal to voters.
The firm urges the Chancellor to:
- Ease the introduction of the new Making Tax Digital regime. This amounts to a digital revolution for taxpayers, and so we strongly recommend that:
- penalties are delayed until 2020 or even later. This would encourage people to join the new system and so work with HMRC to make it a success.
- access to the new system is given to tax agents from the start so they can help their clients from Day One. This really is a priority.
- there is real simplification of the tax system, especially for smaller businesses.
- Smooth the many marginal rates of tax which currently distort taxpayer behaviour and which can deter aspiration.
For example, when income reaches £100,000pa, the effective rate of tax jumps from 40% to 60% due to the withdrawal of the personal allowance at that salary level. But, once income reaches £121,600pa, the effective rate of tax falls back to 40%, until it rises to 45% for income over £150,000pa.
Similarly, the withdrawal of benefits and allowances, such as the marriage allowance and high income child benefit, also give rise to sudden high rates in marginal rates of tax up to 65% for a family with three children.
The current rates incentivise bizarre behaviour as people often try to avoid the peaks in tax rates. A smoother system with, for example, one rate of tax from £100,000 to £150,000 would encourage hard work and also bring transparency.
- Cut the amount of tax legislation. This has grown substantially in recent years and is getting more complicated each year, adding to the red tape businesses must deal with and making it easier for private and corporate taxpayers to make innocent mistakes. The amount of tax legislation should be cut from the current volume of approximately 23,000 pages to a target of just 1,000.
- Abolish stamp duty land tax for people who downsize to a cheaper property. This would help to free up properties and ease demands for property. .
- Replace the new IHT relief on homes with an increase in the nil rate band (NRB) available to all. The current (new) IHT relief penalises those without children, but replacing this with a flat rate increase in the NRB would be simpler and fairer for the taxpayer and could generate the same funds for HMRC.
- No more tinkering: with Entrepreneurs’ relief, enterprise investment scheme (EIS), seed EIS, and venture capital schemes: these encourage entrepreneurs who are helping the economy.
Lisa Ball, tax partner at Smith & Williamson, Salisbury, said: “I think it is crucial to ensure that the new Making Tax Digital system works. Coupled with a more straightforward, flatter tax system with fewer tax reliefs and lower rates would mean that tax becomes simpler.
“The introduction of more even rates of tax would help to reward enterprise and is likely to boost revenues.”
Click here to read the letter