Advisers are urging the Office of Tax Simplification to tread carefully in its review of tax relief amid fears that it will discourage people from saving.
An interim report, published this week by the independent OTS, outlines 74 tax reliefs that it plans to include in its final review.
The list includes a review of income tax relief on insurance bonds, which currently benefit from the 5 per cent rule and top-slicing relief. Potentially exempt transfers for inheritance tax planning and IHT taper relief will also be reviewed, as will capital gains tax and income tax relief for venture capital trusts and capital gains tax relief for enterprise investment schemes.
In addition, the OTS highlights a further 75 reliefs it will review subject to time constraints and 883 reliefs it will not review.
Value-added tax reliefs were excluded due to “complex interactions” between EU law and UK political commitments.
The OTS, established by Chancellor George Osborne in June, says it will focus on reliefs that are largely historic or have a policy rationale that has weakened over time, are not frequently used, benefit a small number of taxpayers or are complex to administer.
Syndaxi Chartered Financial Planning managing director Robert Reid says: “The Government needs to be careful because it is trying to encourage people to save and it could end up being counter-productive. If you shut too many things down, people will just decide not to bother because they might not find the remaining options palatable.”
The Retirement Adviser director Nick Flynn says: “The more you change things, the more complicated it can become and by doing that, you can put people off very easily.”