Savers set to benefit from simpler tax system

• Government moves towards simplifying Help to Save

• Action to be taken to help parents who haven’t claimed Child Benefit and may have missed out on credits for their State Pension

• Government publishes 23 technical tax updates, many of which simplify and modernise the tax system

The Help to Save scheme - for working people on low incomes who are claiming certain benefits – could be made simpler by reforms to how its bonus is calculated, the length of time an account can be open for and eligibility requirements, all with the aim of enhancing long-term savings habits.

Help to Save was launched in 2018 and allows certain people entitled to Working Tax Credit or receiving Universal Credit to get a bonus of 50p for every £1 they save. Accounts can be open for a maximum of four years and savers can put a maximum of £50 into their accounts every month.

The government wants to encourage more people to open accounts, since the scheme began more than £255 million has been saved through it.

These moves to simplify tax form part of 2023’s Tax Administration and Maintenance Day (TAMD), where 23 technical documents in total have been published.

Victoria Atkins, Financial Secretary to the Treasury, said:

Rising prices are putting household budgets under strain – and it’s in tough times like these that many people turn to their savings.

We want to support savers and make sure the tax system provides them with the options they need to shore-up their finances, helping them through rainy days as well as helping them plan for the future.

A simpler tax system will also help deliver on the Prime Minister’s priorities of creating economic growth and reducing our country’s debt.

The government also wants to address the fact that some parents who have not claimed Child Benefit could miss out on building their state pension. Those affected will in future be able to claim National Insurance credit retrospectively as ministers move to tackle this issue.

When parents claim Child Benefit, they can also receive a National Insurance credit which helps them build their state pension. This is aimed at those who, due to caring responsibilities, are out of work or not earning enough to pay National Insurance, to ensure they are still able to do that.

The Government wants to ensure that parents who have not claimed Child Benefit are not disadvantaged when they start claiming their State Pension and is announcing a resolution for affected parents.

Parents do not need to take any action immediately. The government intends to legislate to allow eligible individuals to retrospectively claim National Insurance credit, and the next steps to be taken will be published in due course.

TAMD is a regular event following the Budget which sets out updates needed to the tax system, allowing these measures to be analysed and discussed in detail by tax and industry experts. As announced at Spring Budget, this year’s TAMD is focused on tax simplification and modernisation, and tackling the tax gap.

These changes deliver on the government’s commitment for a simpler tax system to help boost productivity and economic growth by reducing time and money wasted. Since the closure of the Office for Tax Simplification the government has committed to putting simplification at the heart of all tax policy making.

Other measures announced today as part of TAMD include:

• Tackling promoters of tax avoidance: As announced at the Spring Budget, the government is publishing a consultation on a possible new criminal offence for promoters of tax avoidance who don’t comply with a legal notice from HMRC to stop promoting a scheme and, separately, on speeding up the disqualification of directors of companies who promote tax avoidance.
• Protecting customers claiming tax: As announced on 11 January 2023, the government will require repayment agents to register with HMRC from next month.

Further information

• Read the Tax Administration and Maintenance Day Written Ministerial Statement.
• Read the full list of Tax Administration and Maintenance Day measures.
• In addition to changes that simplify the system, this TAMD the government is also tackling plastic waste through the tax system by looking to reform the Plastic Packaging Tax (PPT) to encourage investment in chemical recycling.
• The PPT was introduced last year and sits alongside other reforms to tackle plastic waste, like the plastic bag charge, which has resulted in a 97% reduction in the usage of such bags at the main retailers.
• Unlike traditional mechanical recycling, chemical recycling can break down plastic waste to a molecular level to produce feedstock which can be used to produce new plastic. This means it can offer a complementary route for plastic waste which can’t be mechanically recycled, reducing amounts going to incineration or landfill. It can also produce a higher quality of recycled plastic.
• To recognise the potential role of chemical recycling, help drive demand for this higher quality recycled plastic and boost investment in advanced recycling, a consultation will be launched on the use of a ‘mass balance approach’ for PPT. This is a way to calculate the recycled content in packaging made from chemically recycled plastic, so it can contribute to the 30% recycled content threshold above which no tax is due.

• A consultation has also been launched to reduce paperwork and improve guidance for carriers that export goods on behalf of businesses and consumers, among other potential reforms for the customs treatment of low-value post and parcel exports. These take advantage of the UK’s departure from the EU Customs Union and aim to improve business efficiency for millions of exports every year.

• The Government is also seeking views on modernising of the framework for Stamp Taxes on Shares (STS), charges on share transactions. The move could see the process digitised following engagement with industry and key stakeholders.