In this week’s Budget, Rishi Sunak should increase the personal allowance while taking the opportunity to scrap the income exemptions currently available.
In the last five years, the Government have introduced a number of small reliefs. These include micro-trading and rental allowances of £1,000 each, where the first £1,000 of income is exempt from tax. On top of this, there are separate exemptions for savings income: £1,000 for a basic rate taxpayer and £500 for a higher rate taxpayer, a £2,000 dividend exemption, and a £7,500 rent-a-room relief.
While these reliefs undoubtedly reduce taxes, the complexity is absurd. The Chancellor should recognise that the tax system needs simplification, and he should have a bonfire of superfluous rules and regulations.
All of these small allowances should be bundled up as one flexible allowance for a taxpayer to use as they want – much like the personal allowance is now.
In a post-Brexit UK, when so many taxpayers are craving simplicity and certainty, the Government should finally take the opportunity to cut down the complexity and have a fresh start. After the pandemic, the tax system should be centre stage in the Government’s plans to encourage activity; this measure can be the start of much wider and badly needed reform.
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