After much speculation that Tax Day (23 March) would fill in the holes left in the Budget speech, the exercise was somewhat disappointing, even for tax nerds. Here’s a summary of the Government’s latest announcements.
Back on 18 February the Treasury issued a press release announcing that it would publish “a number of tax-related consultations and calls for evidence at the end of March”. The aim was to provide “…for more transparency and scrutiny [of] documents and consultations that would traditionally be published at a Budget”. That Budget had contained virtually nothing beyond a freeze for inheritance tax (IHT) and capital gains tax (CGT) and no comment on pension tax relief, or trust taxation, all topics which had been the subject of Treasury-commissioned papers. There was thus some press speculation that 23 March, aka Tax Day, would fill in the gaps. Alas, it proved not to be the case.
So, was there anything interesting in the document-fest? The answer is that there were some nuggets, but not enough to merit the pre-publicity. No wonder there were no videos of Mr Sunak linked to Tax Day.
Despite a flurry of rumours in the lead up to the 23 March Tax Day announcements, there were no major changes announced to pensions tax relief.
There was some news on recent reviews that the Government had initiated around IHT and trust taxation.
The Office of Tax Simplification (OTS) has published two reports on IHT, the first, covering administrative issues, in 2018, and the second, covering the tax itself, in 2019, please see here and here.
On the first OTS report, the Government has now announced that from 1 January 2022, return procedures will be simplified so that “over 90% of non-taxpaying estates” will no longer have to complete IHT forms when probate or confirmation is required. Based on data in the OTS reports, that will mean about 225,000 fewer IHT forms being completed each year. Where estate and trust returns are needed, the current easement that removes a requirement for signatures will be made permanent.
The Chancellor added that he has asked his officials to continue work on the remaining recommendations: for digitisation, improving processes for lifetime and trust charges, guidance, and working with court services. Some of these are longer term in nature, and will be taken forward as part of the wider Tax Administration strategy.
And the Government said it will respond to the many simplification recommendations made in the second OTS IHT report (such as replacing the multiplicity of lifetime gift exemptions with a single personal gift allowance) “in due course.”
Of course, as we have said above, the Government already announced, in the March 2021 Budget, that the nil rate band and residence nil rate band will be frozen at £325,000 and £175,000 until 5 April 2026
There was no further news on CGT.
Last summer, the Chancellor asked the OTS to carry out a review to ‘identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent’. Based on the first report published by the OTS on 11 November 2020, it was thought that the Government might look to introduce proposals, such as taxing capital gains at the same rates as income and reducing the annual exempt amount. Of course, as we have said above, the Government already announced, in the March 2021 Budget, that the annual capital gains tax exemption will be frozen at £12,300 until 5 April 2026.
So, in the end ‘tax day’ was fairly uneventful and any major tax changes to address the income side of the Government’s finances, other than those already announced in the 3 March Budget, appear to have been put on the back burner again. The absentees – CGT, pension tax relief, IHT structure – were as notable as the attendees on Tax Day. They could well make their appearance come the autumn Budget.