Simplification needs to be the focus of tax changes after the general election

From a tax perspective, the main political parties may be accused of playing it safe in the run up to the election, as barely any genuine surprises were included in their manifestos. As a result, most of the excitement in the mainstream press has been around what is missing from manifestos. 

Following some media speculation, Sir Keir Starmer was forced to confirm that the Labour Party has no intention of assessing capital gains tax on the sale of individual’s main homes. Additionally, not so long after many taxpayers were hopeful that it would be abolished by the current government, it is interesting to note that inheritance tax does not feature in the Conservative Party manifesto. It is also only mentioned once in the manifesto of the Labour Party, which promises to close a perceived ‘loophole’ for non-UK domiciled individuals. 

Regardless of the make-up of the government following the general election, significant tax changes are expected in the near future, including reforms to the UK tax regime for non-UK domiciled individuals, which interestingly did not feature in the Conservative manifesto, despite being proposed by the current government in the Spring Budget 2024. It also seems likely that we may expect changes around the high-income child benefit charge (HICBC), which was addressed in this year’s Spring Budget and the Conservative manifesto. 

Whilst there is need for some complexity in our tax code, taxpayers with straightforward affairs deserve to have a simple and understandable tax system and any future tax changes need to be designed and implemented with this in mind. The Office of Tax Simplification (OTS) was disbanded in 2023, following an announcement made by then chancellor, Kwasi Kwarteng, in his infamous ‘mini budget’ in September the previous year. At the time, Kwarteng said that ‘instead of a single arms-length body which is separate from the Treasury and HMRC, we need to embed tax simplification into the heart of government’.

Much is being made of the need for increased investment in HMRC to increase the amount of tax it collects. A handful of tax simplifications, such as increasing the HICBC threshold or even taking the charge off the tax return altogether and instead only paying child benefit to those with income below the means-tested threshold, for example, could free up significant HMRC staff resources, potentially allowing HMRC to increase its overall tax yield through improved efficiency.

Any tax announcements may be dressed up as a statement of intent from a new government. It is in the best interests of both the taxpayer and HMRC to ensure that any future tax changes are implemented in such a way that it is clear to see that tax simplification is a key consideration.