Tax Day 2021: What will changes to Inheritance Tax and tax admin mean for you?

Rishi Sunak defends decision on 1% pay rise for NHS staff

When you subscribe we will use the information you provide to send you these newsletters.Sometimes they’ll include recommendations for other related newsletters or services we offer.Our Privacy Notice explains more about how we use your data, and your rights.You can unsubscribe at any time.

Today (March 23), the Treasury announced a number of changes to tax policy. Chancellor Rishi Sunak updated the nation about the country’s finances at the Budget earlier this month, however, the subject of taxes was delayed to a later date to allow time for “scrutiny”. Financial Secretary to the Treasury, Jesse Norman, previously said: “We are making these announcements separately to the Budget, but still all on a single day, in order to give a range of important but less high profile measures greater visibility among Members of Parliament, tax professionals and other stakeholders, and greater scope for scrutiny by them.”

What will changes to Inheritance Tax mean?

One of the changes announced on Tuesday is a reduction on the ‘red tape’ surrounding Inheritance Tax.

The Treasury’s policy document for tax changes states: “Following recommendations by the Office of Tax Simplification, the Government will reduce administrative burdens for those dealing with Inheritance Tax.

“Reporting regulations will be simplified later this year so that from January 1, 2022 over 90 percent of non-taxpaying estates each year will no longer have to complete Inheritance Tax forms for deaths when probate or confirmation is required.

“In addition, the current temporary provision for those dealing with a trust or estate to provide an Inheritance Tax return without requiring physical signatures from all those involved will be made permanent.

“Reporting regulations will also be updated to clarify the requirement for estates to submit an Inheritance Tax account where the deceased was never domiciled in the UK but owned indirect interests in UK residential property.”

More than 200,000 estates per year will be affected by the new changes to Inheritance Tax from January 1, 2022.

Jesse Norman, the Financial Secretary to the Treasury, has previously said: “We want to cut red tape and make the tax system as simple as possible for people to use, especially during difficult times.

“The change is part of our wider drive to remove unnecessary paperwork and obstacles so that taxpayers can manage their affairs with less effort.”

What will changes to tax admin mean for you?

The Treasury’s tax policy document has emphasised the department’s wish to simplify the taxation system in the UK. 

Making Tax Digital (MTD) was first introduced in April 2019 for VAT for businesses with a taxable turnover above the VAT threshold and from April 2022, legislation will extend MTD to smaller VAT registered businesses.

Later this year, the Treasury aims to legislate for the extension of MTD to Income Tax Self Assessment. 

This means from April 2023, Self Assessment tax will be dealt with by a more modern, digital system. 

DON’T MISS: 
IR35 changes may force workers into umbrella firms – be aware [ANALYSIS]
HMRC issue urgent warning on next week’s Self Assessment tax deadline [WARNING]
Pension: Tax allowances ‘will only get worse’ as Rishi Sunak acts [INSIGHT]

The Treasury’s policy document adds: “The Government is publishing a call for evidence to begin to explore the opportunities and challenges of more frequent payment of income tax within Income Tax Self Assessment, and of corporation tax for small companies, based on in-year information.”

The Tax Day announcement has been widely anticipated over the last few weeks. 

Mr Norman said: “We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking.

“These measures will help us to upgrade and digitise the UK tax system, tackle tax avoidance and fraud, among other things.

“By grouping them together, we want to give Members of Parliament, tax professionals and other stakeholders a better opportunity to scrutinise them.”

Prior to the Tax Day announcement, there had been some reports the Treasury was considering cuts to pension tax relief. 

Tax relief is paid on pension contributions at the highest rate of income tax someone pays and bands are set at 20 percent, 40 percent and 45 percent, depending on someone’s earnings.

There had been some speculation pension tax relief could be set at a flat rate of 20 percent, which would have affected higher earners.

There had also been reports of a possible introduction of online sales taxes, or changes to Capital Gains Tax. 

Source: Read Full Article