Following the general election, it’s likely that a number of tax changes will be announced later this year, regardless of the outcome. Here, Andrew Rainford shares a bucket list of ten tax reforms he’d like to see introduced!
High income child benefit charge
This should be scrapped as the whole premise of the charge is a throwback to the days before individual taxation. Instead of excluding children from higher income families the money could be deposited in a form of child trust fund.
Disguised remuneration loan charge
Paying employees through complex offshore trust arrangements via loans was a popular scheme for tax promotors at one point. Many agency workers were unwittingly caught up in the arrangements. Enforcement is ongoing and I’d like an amnesty for those who weren’t directly involved in the decision to enter into the arrangements.
Income tax allowances and thresholds
The personal allowance and basic rate band have been frozen for years despite eye-popping levels of inflation. I suggest a personal allowance of £15000 and a higher rate threshold of at least £60000.
Capital gains tax
If CGT is aligned with income tax rates (as has been speculated) I’d like to see the annual exemption aligned with income tax personal allowance. There should also be an adjustment for inflation so that only real-terms gains are subject to tax.
Dividends
The dividend allowance has dwindled to practically nothing as part of a push to eliminate the tax advantages of operating a single director shareholder company. A system that differentiates between payments from shares held by investors rather than owners would be fairer.
Pensions
If the lifetime allowance charge makes a return I hope it is set at a much higher point than prior to its removal. £1.1 million would buy an annuity of around £40000 if purchased at age 60 currently which isn’t a huge amount by any means.
Inheritance tax
The IHT nil-rate band is worse than the income tax allowances pulling more people into a tax intended to affect only the wealthiest. I’d like to see a major uplift in the NRB and for long-term family homes to be exempted from the charge as are family businesses.
Tax policies
As an adviser it’s frustrating trying to provide advice when legislation can change with little or no notice at any time. Let’s return to a single fiscal event with new rules taking effect from the start of the next tax year in all but exceptional circumstances.
Duality of purpose
The duality of purpose argument is often used by HMRC to deny a tax deduction for expenses that have both a personal and business purpose. It’s bad law - there really isn’t any other way to put it - and it should be reviewed.
Silly VAT questions
We’ve all heard of the Jaffa Cake VAT case and there are countless others. The arguments are amusing but a lot of tribunal time is taken up arguing over whether a certain product falls a particular side of a very fine line. I’d like an overhaul of the VAT groups to ensure the tax is levied where it is supposed to be - on luxury items.
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