Many taxpayers are oblivious to the ‘important’ and ‘complex’ changes to the taxation of savings and dividends, a House of Lords report has suggested.
The changes to the taxation of savings will result in the termination of the Tax Deduction Scheme for interest, whereby banks automatically deduct tax from the interest earned on individuals’ non-ISA savings.
6 April 2016 also sees major reform to the dividends system, with the introduction of a new Dividend Tax Allowance and new rates of tax on dividend income.
However, the House of Lords Economic Affairs Committee claims that HMRC’s ‘inadequate’ communications strategy has left taxpayers ‘unaware’ of the impending changes.
Additionally, the committee stressed concerns about the confusion that the changes will bring, stating that the lack of a roadmap outlining the key alterations could hinder individuals’ abilities to plan effectively for the long term.
Furthermore, the report insisted that the Government must demonstrate how it is taking steps to deliver a ‘simpler’ tax system to taxpayers.
Chairman of the committee, Lord Hollick, said: ‘Changes to how we are taxed can have a huge impact on financial planning, including savings and pension arrangements.
‘A great many savers will have no idea that, from April, they may for the first time have to check whether they need to report or pay tax on interest they have received, rather than have their bank deduct the tax they owe.
‘HMRC must now roll out a public awareness campaign that takes account of those not digitally engaged and the needs of older people who may be more likely to rely on savings income than those of working age.’
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