Outdated reliefs and allowances – the impact

Reliefs and allowances are a key feature of the tax system. However, where they are not increased in line with inflation, their importance and usefulness declines and taxpayers can be left out of pocket.

The ATT has identified some of the most outdated reliefs and allowances across the tax system, ranging from VAT to employment, self-employment, inheritance tax, and savings. As explained below, these continuing freezes create additional complexity, and increase admin and costs for households and businesses.

We appreciate that uplifting some of these reliefs and allowances in line with inflation would increase costs for the Exchequer.  However, we believe that a proper commitment to reviewing them regularly would go a long way towards making tax simpler, fairer, and fit for today's economic landscape.

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Summary infographics

An overview of the impact of frozen reliefs and allowances
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VAT partial exemption

The de minimis limit has not changed in nearly 30 years, increasing costs and complexity
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Inheritance tax allowances and relief

IHT reliefs have been frozen so long they are now part of the permafrost, with some unchanged since 1975
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Simplified expenses for the self-employed

Failure to increase working from home reliefs further squeezes the self-employed
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Flat rate expenses for employers

Employees are bearing the cost of work expenses due to frozen limits
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Trivial benefits

The £50 tax free limit has not increased since the rules were introduced
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Annual parties

The ‘Christmas party’ tax relief has not increased in 23 years, resulting in a lack of festive cheer for employers
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Rent a room relief

Tax free allowances for renting to lodgers have not kept pace with rising rents
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Personal savings allowance

Rising interest rates and frozen allowances mean more costs and admin for taxpayers
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Pension contributions

Taxpayers receiving income from investments and property are losing out on pensions tax relief