Savings allowance is too complex for many taxpayers

The savings allowance is an excellent idea but needlessly complex in its implementation according to the Low Incomes Tax Reform Group (LITRG).

It believes many taxpayers will struggle to understand the operation of the allowance and how it interacts with the starting rate for savings and the £5 000 dividend allowance. It said all three are in reality nil rate bands of tax that operate differently from each other.

However the LITRG conceded that the changes would simplify the tax position for most people with modest savings income.

In its response to the Finance Bill 2016 consultation (tinyurl.com/j3z5uvb) the LITRG said unrepresented taxpayers would be unaware of the need to check the level of their savings income and would not understand how to work out the correct tax rate.

They may also not realise they need to keep HMRC up to date with changes to...