Complexities of savings taxation tackled by OTS

The Office of Tax Simplification (OTS) has published a report on the taxation of savings income and identifying areas that might be simplified.

The report found that of UK adults 65% save some of their income and many have a private pension (78% of employees 17% of the self-employed). Most 95% have no tax to pay because of tax reliefs aimed at encouraging people to save. But there are significant complexities in some areas.

The report covers interest and dividend income individual savings accounts (ISAs) pension withdrawals life insurance bonds and collective investment vehicles such as unit trusts.

It identifies several responses that could be beneficial. They include:

• a review of the various savings rates and allowances and how they interact to ascertain options to streamline the income tax calculation;
• introduction of a personal tax...