The Office of Tax Simplification (OTS) has published a comprehensive review into the taxation of savings income.
In its review, the OTS identified areas that could be simplified, as well as areas that might benefit from ‘further work’.
The OTS stated that the UK tax system ‘works well for most taxpayers’, but also found that many individuals ‘continue to worry about the tax treatment of their savings income’.
The calculation of tax on savings income ‘is not always straightforward’, said the OTS.
It revealed that the tax complexity on savings and investment income can be attributed to the interactions between the ‘many reliefs and allowances’. A solution to this will need to take a ‘comprehensive view’ to ensure that taxpayer benefits derived from reliefs and allowances are ‘preserved’, the OTS stated.
Commenting on the review, Angela Knight, Chairman of the OTS, said: ‘The UK savings tax system works well for most savers as they don’t have to pay tax on income from their savings until it is more than £1,000 a year, and they can also contribute £20,000 a year to their ISAs where income is not taxed either.
‘But many taxpayers continue to worry that they will be taxed on their savings income, and misunderstandings and confusion remain. This is the area, and inevitably the complexity, that the OTS considers is now the time to address.’
The review can be viewed in full here.