February 18th 2020 9:45 am

Written by Louise Harrison

home :: tax news :: personal tax

Tax Reliefs Reduce Your Tax Bill But Treasury Is Looking For Cuts

Near 1,200 tax reliefs exist, but around 360 are reliefs that are part of policy, part of those cost around £155 billion a year and many could be altered or removed.

Tax reliefs are used by people and businesses to shrink their tax bills and the effect, for example using our tax reliefs and expenses calculator, can be significant.

There are structural reliefs such as personal allowances on specific income types as well as non-structural reliefs called 'tax expenditures'. These are part of government policy decisions and are created to shape government policy at the time. These cost around £271 billion per year.

Examples of tax expenditures (non-structural reliefs) include R&D (Research and Development) Tax Credits. Another example is tax relief on pension contributions. There are 362 reliefs like these and estimated costs for 111 of them are around £155 billion annually. Estimates for only 111 as those are the ones HMRC provides costs reports for. Additionally, the amount they cost is not the final figure as, due the behaviour shaping effect they have, tax/revenue could change too.

Last July the OBR (Office of Budget Responsibility), the public body that puts together the figures for the UK Budget stated that these types of tax expenditures have added complexity to the tax system, are not fully costed or evaluated and are a risk to public finances. In short, the need to be assessed for value for money.

With the 2020 UK Budget coming up in a few weeks it is possible that the Chancellor could make slashes in this area.

Here are some headline, or more well-known, tax expenditures (Non-structural Tax Reliefs):

DescPurposeEst. Annual Cost
Under-21 y/o Employee, Employers NIC (National Insurance Contributions) relief Encourage employment of people below age 21 £610 million
Under-25 y/o Apprentices, Employers NIC relief Encourage provision of apprenticeships £160 million
Reduced Stamp Duty For First Time Buyers Up to £300k is zero-rated, £300k-500k is five percent. £520 million
EIS (Enterprise Investment Scheme) Income & CGT relief for investing in small companies £720 million
Zero VAT on construction/sale of new build residential/charity property Supports housing construction targets £14.8 billion
Agricultural property Inheritance Tax Relief Support farming business activity £315 million
R&D Tax Relief (SME) Small/Medium business research and development investment £2.5 billion
R&D Expenditure Credit (Mainly Large Co's) Extra deduction from company taxable income, or tax credit if in loss. Supports investment. £2.3 billion
Entrepreneurs' Relief (CGT - capital gains tax) Encourage enterprise by providing reducing CGT to 10% when selling a business/or business shares £2.2 billion
Patent Box Reduces CT to 10% on profits from patented inventions - supports commercialisation of intellectual property. £1.1 billion
Film Tax Relief Tax credit for loss-making productions in the UK, or tax relief for profitable productions. Supports UK film production. £550 million

Some of the above are already mooted for cuts or changes come the March Budget. Additional reliefs not listed above include (ordered by cost):

HMRC are setting up to provide full costing for all 362 of the tax expenditures gradually starting from 2020 to 2022, therefore you can expect the additional information provided to the OBR to be used when deciding where cuts can be made in the future.

An example is entrepreneurs' relief, which was set up to encourage enterprise and investment, and when evaluated found only 8 percent of those using the relief saying it influenced their investment plans. This relief is likely to be mentioned in the budget.

See more articles from February 2020

Keywords:

Topics
Election - 33 available Personal Tax - 268 available Uk Budget - 88 available Welfare - 6 available Autumn Statement - 23 available Fraud - 13 available Business Tax - 31 available General - 68 available Expenses - 9 available Spring Statement - 7 available Tax Return - 39 available Self Employed - 21 available Limited Company - 4 available Benefits - 1 available Company Cars - 3 available
Browse Archives:
November 2024 - 1 available October 2024 - 6 available September 2024 - 3 available August 2024 - 4 available July 2024 - 5 available June 2024 - 7 available May 2024 - 5 available April 2024 - 2 available March 2024 - 6 available February 2024 - 2 available January 2024 - 4 available December 2023 - 3 available November 2023 - 4 available October 2023 - 4 available September 2023 - 2 available August 2023 - 2 available July 2023 - 2 available June 2023 - 4 available May 2023 - 5 available April 2023 - 2 available March 2023 - 6 available February 2023 - 4 available January 2023 - 7 available December 2022 - 6 available November 2022 - 4 available October 2022 - 5 available September 2022 - 9 available August 2022 - 3 available July 2022 - 3 available June 2022 - 3 available May 2022 - 4 available April 2022 - 3 available March 2022 - 3 available February 2022 - 4 available January 2022 - 4 available December 2021 - 4 available November 2021 - 3 available October 2021 - 3 available September 2021 - 3 available August 2021 - 3 available July 2021 - 6 available June 2021 - 2 available May 2021 - 4 available April 2021 - 3 available March 2021 - 5 available February 2021 - 3 available January 2021 - 9 available December 2020 - 5 available November 2020 - 5 available October 2020 - 5 available September 2020 - 8 available August 2020 - 5 available July 2020 - 13 available June 2020 - 3 available May 2020 - 7 available April 2020 - 5 available March 2020 - 10 available February 2020 - 10 available January 2020 - 6 available December 2019 - 6 available November 2019 - 7 available October 2019 - 5 available September 2019 - 6 available August 2019 - 9 available July 2019 - 6 available June 2019 - 4 available May 2019 - 4 available April 2019 - 4 available March 2019 - 9 available February 2019 - 4 available January 2019 - 6 available December 2018 - 3 available November 2018 - 5 available October 2018 - 7 available September 2018 - 9 available August 2018 - 3 available July 2018 - 4 available June 2018 - 5 available May 2018 - 6 available April 2018 - 4 available March 2018 - 6 available February 2018 - 6 available January 2018 - 2 available December 2017 - 5 available November 2017 - 8 available October 2017 - 5 available September 2017 - 4 available August 2017 - 3 available July 2017 - 5 available June 2017 - 2 available May 2017 - 5 available April 2017 - 4 available March 2017 - 6 available February 2017 - 3 available January 2017 - 4 available December 2016 - 3 available November 2016 - 4 available October 2016 - 3 available September 2016 - 2 available August 2016 - 6 available July 2016 - 4 available June 2016 - 2 available May 2016 - 2 available April 2016 - 2 available March 2016 - 3 available February 2016 - 2 available January 2016 - 5 available December 2015 - 3 available November 2015 - 4 available October 2015 - 3 available September 2015 - 2 available August 2015 - 2 available July 2015 - 5 available June 2015 - 3 available May 2015 - 1 available April 2015 - 2 available March 2015 - 6 available February 2015 - 3 available January 2015 - 3 available December 2014 - 4 available November 2014 - 2 available October 2014 - 5 available September 2014 - 1 available August 2014 - 2 available July 2014 - 2 available June 2014 - 3 available May 2014 - 2 available April 2014 - 5 available March 2014 - 4 available February 2014 - 2 available January 2014 - 5 available December 2013 - 3 available November 2013 - 3 available October 2013 - 4 available September 2013 - 5 available August 2013 - 7 available June 2013 - 1 available April 2013 - 3 available March 2013 - 6 available February 2013 - 5 available January 2013 - 4 available December 2012 - 1 available March 2012 - 3 available January 2012 - 2 available

© 2008 - 2024 UKTaxCalculators.co.uk