“The Office of Tax Simplification’s 15 recommendations to tackle the tax system are – in a nutshell – simple and straightforward. This is as it should be. The range of topics covered are hard to argue with. They focus on areas where the complexity is so immense that people are losing out through no fault of their own. The report puts the onus on the government to tackle cobwebs that are lurking including child benefit and net pay. With an election seemingly around the corner the package of reforms provide strong recommendations for any incoming government to make lives easier for the public and earn the name of champion of simplification.”
“The report highlights the impact of numerous pension allowances, such as the annual allowance, lifetime allowance and money purchase annual allowance. In particular they flag the MPAA, which is aimed at preventing over-55s from double dipping on pensions tax relief is not producing a “fair result”. A systematic review of pension taxation would be highly welcome and a good chance to evaluate how all the allowances interact and impact how people are saving.”
“The counter-intuitive nature of claiming child benefit has been highly reported and it’s encouraging to see the OTS acknowledge this needs to be amended. Along with their recommendations they should allow parents to backdate NI credits for more than the current three month period.
“A sleep deprived overwhelmed new parent is presented with reams of new responsibility and information. There will be numerous things on their mind, but what isn’t likely to be one of them is their state pension. In fact that’s unlikely to cross their mind until they come up for air, which could take months. And yet the government is claiming that three month leeway on appropriately filling out a child benefit form is enough. This limited timeframe is even more absurd when you consider that parents who are subject to the High income child benefit charge, and therefore don’t need to claim child benefit, still need to fill out the form so they can get NI credits.”
“Discrepancies around how pensions are treated when it comes to net pay schemes or relief at source is far more than a mere inconvenience. It’s a flaw that means nearly two million low earners are being deprived of free pension cash and this could account for nearly £8k in lifetime savings.”
“Awareness and understanding of tax is limited in the UK and this creates vulnerability for the public and challenge for HMRC. So, as the OTS highlights, it’s in everyone’s interest to improve the public’s understanding. The best outlet for the upcoming generations is to implement financial education in primary schools. Research shows that 68% of primary school students who showed little capacity for delaying gratification initially, did so at the end of financial education classes.”