Financial secretary to Treasury promises to put simplification at the “heart of tax policy design”
Treasury chief Victoria Atkins vowed to make the taxation system “fairer” – a move which flies in the face of recent tax hikes impacting freelancers, contractors and the self-employed.
Atkins, who has served as the financial secretary to the treasury since October last year, has promised a range of measures to make the tax system more straightforward, according to PoliticsHome.
If delivered, the strategy would represent a shift in the way the government handles taxation and follows a report released by the Treasury Committee in June.
The report found that the UK currently has an “overcomplicated tax system” which is “an obstacle to economic dynamism” and creates “compliance burdens, confusion and disincentives to work or grow a business”.
Tax simplification measures outlined
The promise to simplify the tax system means an overhaul in several areas.
One of the key changes is to the Self Assessment threshold for people taxed only through PAYE. This will increase from its current level of £100,000 to £150,000, effective at the start of the 2023/24 tax year.
Additionally, the Annual Allowance on pensions will increase from £40,000 to £60,000, eliminating the obligation to report and pay tax on their pensions for many taxpayers.
Alongside these measures, there are broader reforms for customs import and export processes and changes to IT systems which will allow HMRC to payroll benefits in kind to simplify administrative requirements for business.
HMRC is also undertaking a review of tax guidance for small businesses, in collaboration with businesses and other “representative bodies”.
Independent workers have faced heavy tax burden
The pledge to simplify the tax system follows years of increasing complexity, which have seen a number of rate freezes, hikes and various reform. These have disproportionately affected the UK’s self-employed workers.
Tax simplification was touted by former PM, Liz Truss, and her Chancellor, Kwasi Kwarteng, during their brief tenures in 2022. They announced plans to immediately streamline income tax by cutting the Basic rate and removing the Advanced rate, alongside a range of other simplification measures. These included rolling back of IR35 reform, as well as cancelling the planned increase to Corporation Tax.
While the rollback of IR35 reform in particular was welcomed, the aggressive approach to tax cutting caused instability in the financial markets. This also eventually led to the resignation of both Truss and Kwarteng.
Rishi Sunak and Jeremy Hunt – who have replaced Truss and Kwarteng as PM and Chancellor, respectively – were quick to reverse many of the measures taken by their predecessors.
Along with keeping the off-payroll rules in place, Hunt also oversaw an increase in the headline rate of Corporation tax from 19% to 25% and cut the tax-free allowance on dividends.
However, the government has maintained that it is committed to tax simplification.
Measures will help to “grow our economy”
Speaking to PoliticsHome, Atkins said that, moving forward, tax simplification would be “at the heart of tax policy design and implementation”. Making the tax system simpler “will be achieved in many different ways”, Atkins explained.
“We are cutting paperwork for traders and small businesses, we have built HMRC’s new app to enable taxpayers to settle their taxes quickly and easily, and our recent pension changes have removed barriers, helping senior doctors and others remain in work.
“I want people and businesses to earn money, create jobs and grow our economy, rather than worry about. These measures and more will help us achieve this,” she concluded.
In April this year, the Low Incomes Tax Reform Group (LITRG) welcomed “the Chancellor’s assurance that simplifying tax remains a priority”. The body wrote to Victoria Atkins offering its support and issued a ten-point plan to the government that would “see tax simplification embedded as promised”.
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