The Scottish budget has heaped more complexity on an already complex income tax system. There are to be two new rates for taxpayers on low and middle incomes.
Already, a UK taxpayer may have income that is charged at default rates, savings rates and Scottish rates. These rates include:
the default basic rate, the default higher rate, the default additional rate, the savings basic rate, the savings higher rate, the savings additional rate, the starting rate for savings, the savings nil rate, the dividend nil rate, the dividend ordinary rate, the dividend upper rate, and the dividend additional rate …
That list is drawn from a quick look at sections 6 to 16 of the Income Tax Act 2007, as revised, published in Tolley’s Yellow Tax Handbook. (Other handbooks are available.)
I know where to look because I used to prepare personal tax returns and I had to know the law. I was told that if I really wanted to understand the tax system I should go to the legislation first.
Let’s suppose that I didn’t write about tax and did something more exciting instead, but I still wanted to understand income tax rates (and national insurance contributions, but that’s another story).
Why would I want to bother? I might not find HMRC’s published guidance particularly helpful (or easy to find), or I could be helping a relative with a tax issue, or I might just think I should be able to look up the actual law that requires me to pay tax.
People should be able to understand the law that governs them, or at least be able to read it.
On the face of it, The National Archives has the answer. It’s a government department and an executive agency of the Ministry of Justice.
Annual finance acts continue to amend the main taxes acts, including Income Tax Act 2007 which sets out the basic rules about income tax rates, allowances etc. Look up that act on legislation.gov.uk and you’ll see a warning about outstanding changes.
There is a list of more than 600 changes that have been made to the act, many of which “have not been applied by the legislation.gov.uk editorial team to this legislation item”.
There is some tax legislation for which revised versions are not provided at all, for technical reasons, according to the website. “We hope to include these in the near future,” it says. These include Taxes Management Act 1970, which sets out taxpayers’ obligations and HMRC powers, penalties for non-compliance etc. Only the original version – now more than 47 years old – is published. Similarly, only the original version of Taxation of Chargeable Gains Act 1992, which has the capital gains tax rules, is provided.
“We have embarked on a programme designed to bring the revised legislation fully up to date,” The National Archives says. “We champion wider access to information generated by the public sector, so that it can be shared and re-used by citizens, community groups and businesses,” it adds. But this is a huge task, at least in relation to tax.
Would I advocate, at this time, the significant investment that would be required to speed up this process with a view to securing this wider access? I’m not sure I would.
But let’s imagine that this archive was up to date. Two consequences, at least, could follow.
Any taxpayer would be able to look, free of charge, at the current tax law that governs what they are required to pay. It’s not a lot to ask, is it?
Secondly, the public debate about tax might be better informed. Those who complain about complexity, or uncertainty, would be able to point to the law itself. And those who campaign for changes in the system would be able to see, free of charge, how the current system is legislated.
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