telegraph.co.uk / By James Kirkup and Richard Evans / January 23, 2013
More than half a million savers, most of them pensioners, should be forced to pay more tax, say Treasury advisers.
The Office of Tax Simplification (OTS) said the 10 per cent tax rate paid on some savings income should be scrapped so that all such income is taxed at 20 per cent.
The OTS is an independent group of advisers set up by the Coalition to propose ways of making the notoriously complex tax rules easier to understand.
The 10p rate applies to the first £2,710 of income from savings of low earners and was left in place in 2008 “to encourage savers” when Gordon Brown controversially scrapped the 10p rate of income tax.
The OTS found that the 10p rate was little understood and added unnecessary complexity to the tax rules. As a result, it should be abolished, the panel said.
The change would cost 525,000 savers, most of them pensioners, an average of £90 a year, or £5?million in total. In exchange, the advisers said, annual limits in tax-free Individual Savings Accounts (Isas) should be increased for all savers. That would mean pensioners had to move savings into Isas to avoid a tax rise.