The government has responded to the Treasury Committee’s ‘Tax After Coronavirus’ report, which was published in March, with a clear indication that it doesn’t plan to make further significant tax changes, in this parliamentary term at least.
The Treasury Committee had encouraged the government to urgently reform pension tax relief, which is viewed as generous particularly to high earners. However, the government responded by reiterating that a consultation in 2015 indicated no clear consensus for reform.
While the government announced in the March budget a freezing of the lifetime allowance at £1,073,100 until April 2026, Jesse Norman, Financial Secretary to the Treasury, responded to the Treasury committee saying “while all tax reliefs are kept under review, more radical changes to pensions tax relief would require careful consideration.”
The Committee’s report had also asked for a reform of Stamp Duty Land Tax (SDLT) to be prioritised, citing it as inefficient and causing damage to the economy by affecting when and how often people buy homes. Chancellor Rishi Sunak faced numerous calls to scrap SDLT completely following the stamp duty holiday which has helped fuel a surge in property prices.
However, the government response ruled out any hope of imminent reform. “The SDLT holiday was introduced as a temporary measure to help give people the confidence to buy and sell during the pandemic, in turn supporting jobs that rely on the Sector,” the government response says. “The SDLT holiday was extended at Spring Budget 2021, and the £500,000 nil rate band uplift will now end on 30 June 2021.”
The government describes SDLT as “an important source of revenue” which raised £8.4bn for residential and £3.2bn for non-residential in 2019-20 tax year.
The committee had also asked the government to set out principles and objectives for the UK’s Value Added Tax (VAT) system now it is free from EU Law. The government responded that it “intends VAT to remain a broad-based tax on consumption where the standard rate of 20 per cent applies to most goods and services.” VAT raised approximately £130 billion in 2019–2020.
The committee also recommended the government should develop a tax strategy to meet net zero, which should include tax measures to incentivise the behavioural changes. While the government cited the launch of the UK Emissions Trading Scheme and its ‘Ten Point Plan for a Green Industrial Revolution’, the committee said it was “disappointed that the government did not agree to [its] recommendations”,
Sarah Coles, personal finance analyst at Hargreaves Lansdown says “The government’s reply to the ‘Tax after Coronavirus’ report was an emphatic ‘not now!’ Some potential tax changes have been taken off the table entirely, while others have been pushed very firmly down to the other end of it.
“While the economy is still recovering, and we’re still uncertain whether new variants will divert the path out of the crisis, the government isn’t going to make any sudden moves. Nobody is going to touch pensions tax relief, capital gains tax, inheritance tax or stamp duty until we’re on a much firmer footing.”
She adds that this doesn’t mean capital gains tax or inheritance tax are off the table entirely, because the government highlighted that it was still keen to eliminate features of the tax system that distort behaviour. It means we shouldn’t expect changes imminently.
