The creation of the Office of Tax Simplification should have made tax... well, a little simpler. When it comes to allowances, however, Tracy Henson of Barnett & Turner Accountants says that things have actually become more complicated. The Office of Tax Simplification (OTS) was set up in 2010 and became a permanent independent office of HM Treasury in the summer of 2015. In theory, it provides Government with advice on the areas of the UK tax system which are overly complex and collects evidence with a review to reform.
In the eyes of many accountants, however, there seems to be more complexity than ever in terms of the issues confronting many of our clients. Before we can answer a straightforward question on their tax liability, we have to wade through a whole checklist of allowances. Even calculations for lower earners have become problematic, when traditionally they were usually pretty straightforward.
Put simply, allowances reduce the amount of tax you have to pay. Some give you full relief and allow you to earn a certain amount of money before paying any tax. Others give restricted relief and reduce your tax bill by a tenth of their nominal amount.
Today, in tax year 2016/17, these are the specific allowances available:
Personal Allowances – taper at £100,000
Married Couple Allowance - only for those born before 1935
Marriage Allowance – only for basic-rate taxpayers
Personal Savings Allowance - £1,000 or £500 or £0
Savings Rate of Income Tax – 0% on the first £5,000
Dividend Allowance - £5,000
Micro Trading Allowance - £1,000
Micro Property Allowance - £1,000
Rent a Room Allowance - £7,500
If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk