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Chancellor should increase the personal tax allowance, but scrap income exemptions in this week’s Budget

In this week’s Budget, Rishi Sunak should increase the personal allowance while taking the opportunity to scrap the income exemptions currently available, says Robert Pullen.

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.

Whilst 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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