Let’s make tax simple

IT IS practically impossible to do any financial planning during an election — and particularly this one.

How on earth is anyone expected to make long-term plans for their pension or property when there is so much uncertainty?

All parties are promising the world just now — with tax cuts here and financial incentives there. But if, like me, you believe we may get another coalition government it is utterly meaningless as each pledge will be horse-traded away.

What we really need is an all-or-nothing approach to our personal tax system.

Let’s scrap the whole darned thing and start again, or have a moratorium where no one messes around with it for at least a couple of years.

I’d be in favour of the former — and not just because of the news stories it would generate!

The UK tax system has been tinkered with so many times over the years that it has become inconsistent and untidy. It unfairly penalises the lucky and the timepoor middle classes, while allowing the wealthy and the financially astute to get away with paying less.

Take inheritance tax. for most people it operates like a capital gains tax, as it is effectively a penalty on house-price growth.

The di f f erence is t hat t he inheritance tax rate can be more than double that of capital gains that would apply to an investment which had been planned.

Buy-to-let sits untidily in this too as it is taxed like a business, though many use it like an investment.

Landlords can deduct mortgage i nterest f r om t hei r i ncome tax bills, which gives them a whopping advantage over ordinary house buyers.

This tax regime was set up when there were only a handful of private sector landlords in the country — not the millions of second-home owners there are today.

Meanwhile, our income tax and National Insurance rates are opaque. The two taxes sit side by side — yet most people think about them in isolation.

They kick in at different points, and the self-employed pay less. It means most people never really know how much t ax t hey’re actually paying.

So, as you earn more at different points in our tax system you pay a marginal rate of 12 pc, 32 pc, 42 pc, 62 pc, 42 pc again, then 47 pc.

Then there is the confusing way dividends are taxed inside and outside of an Isa and pension. And the different reliefs you get on your pension.

We do have an Office of Tax Simplification, which has come up with some practical — if sometimes, controversial — policies. But really what we need is to tear down the whole system and start again.

This would make matters simpler and more transparent, giving greater stability and security for all — and stop politicians tinkering with our financial futures.

Good example

AFTER years of treating customers as cash cows whose problems were an awkward distraction from the actual business of making money, some banks have realised that service, satisfaction and a good reputation among consumers may not be such a bad thing after all.

It’s very noticeable when Money Mail rings them with your complaints. There are those that act swiftly and responsibly to do the right thing.

And then there are those that take a long hard look at their terms and conditions, and dig in their heels.

It has created a banking upper and lower class.

It wouldn’t have been long ago that the fraud suffered by hair salon owner Jenny Tofts would have left her out of pocket for good. By the letter of the law she authorised a payment to crooks.

But Halifax’s decision to pay her back — albeit after being contacted by us — demonstrates an understanding of the circumstances their customer found herself in.

The bank has done the right thing and should stand as an example to rival firms faced with a similar customer dilemma.

In a perfect world every bank would make the right decision at the first opportunity. But realistically this is never going to happen.

So a happy middle ground is where banks put their hands up, admit there was a problem, and do everything in their power to help their loyal customers.

Taking off

THE new complaints service being set up by the airlines is not going to be a perfect system. I’d prefer it to be free for consumers and for there to be a single overarching scheme, which should be t otally independent of the airlines and compulsory for them to join. But the new service promises to be a vast i mprovement on i ts predecessor run by the Ci vi l Aviation Authority. The CAA struggles to keep on top of current complaints, as it — rightly — has greater concerns ensuring that the skies over Britain remain safe.

Money Mail has l ong called for an independent travel ombudsman service.

The proof of how good this new service is will be in the pudding.

If no one uses it, if consumers don’t think they’re getting a fair hearing, or if airlines start ignoring its decisions, then it could well be that a compulsory scheme is needed after all.