UK tax reliefs top £164bn

The UK’s tax relief bill grew to a record £164bn in 2018-19, significantly more than the health budget, but are being distributed unequally between households, according to research from the Resolution Foundation based on the latest figures from HMRC

The think-tank, which is focused on improving the living standards for those on low to middle incomes, said the reliefs are the equivalent of almost £6,000 per household in the country.

The biggest single tax reliefs are zero/reduced VAT rates on the likes of food and energy (£53bn), followed by the capital gains tax exemption for main properties (£27bn) and pensions income tax relief (£25.6bn).

The think tank argues that while some reliefs benefit almost all families, others see very large gains going to very small numbers of people. The Foundation notes that the average individual gain from agricultural or business property reliefs on inheritance tax was around £270,000, while the average gain from entrepreneurs’ relief was £50,000.

The Foundation says that while there are often good reasons for tax reliefs, they are rarely scrutinised for their efficacy in the way that other tax cuts or spending increases are, and is calling for a full review of the current 1,000 or so reliefs.

Adam Corlett, senior economic analyst at the Resolution Foundation, said: ‘Government spending rightly comes under a lot of scrutiny for cost-effectiveness. But tax reliefs often escape even the most basic checks and debate.

‘Given the looming fiscal pressures our country faces, it is particularly hard to justify huge expenditures on inheritance and entrepreneurs’ reliefs, both of which overwhelmingly benefit small numbers of the very wealthiest households.

‘Reviewing the value-for-money of these tax reliefs should be an integral part of the spending review process later this year.’

The Foundation’s total figure excludes tax reliefs such as the personal allowance and capital allowances, on the basis these are integral parts of the tax system.

HMRC statistics on main tax expenditures and structural relief are here.

Report by Pat Sweet

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