The author of this article takes us on a tour of the tax issues arising for the new UK government following last week's general election result.

There is a lot for wealth advisors to consider now that the UK has a new government – enjoying a large majority of seats in Parliament – and emboldened to take radical action. To consider some of the issues is Katharine Arthur, partner and head of private client business at chartered accountancy firm haysmacintyre. (See a previous article by the author.) As usual, the editors don’t necessarily endorse all views of guest writers. We are grateful for the chance to share these insights. Email tom.burroughes@wealthbriefing.com if you would like to comment.

Tax is sure to have been a key factor in many people’s votes in the general election. But as the nation considered the various tax offerings, promises, and claims made by the different parties, other concerns about the tax system have perhaps been lost amidst the election noise and politicizing. Whilst likely to be inevitable given the attention an election captures, this doesn’t mean that the more systemic issues the government will need to tackle post-election have gone away.

Short-term policies designed to tackle specific, current economic circumstances are, of course, always necessary, but it is also vital that these do not overshadow the equally pressing need to look at the problems with our tax system. Indeed, it is arguable that fixing longer-term problems which have plagued successive governments, as well as tax agents and their clients, will be most important – and could in fact remove the need to rely on short-term policy sticking plasters.

The dangers of running before you can walk
Tax has been one of the key issues up for debate over the course of the general election campaign, even if the detail in manifestos and debates has been lacking. Although a summer budget will not follow the election, with the new Labour government having decisively ruled out the prospect, it would not be a surprise to see the new government wanting to stamp their authority with some early policy implementations.

However, the reality is that tinkering around the edges of the tax system, for instance through increasing “stealth taxes,” won’t make a meaningful difference. Indeed, these will potentially only increase the complexity of a tax system that is already struggling under this very burden, with stories about HMRC wait times and issues perennially in the news.

What we need is to shore up our tax system and tackle the complex setup and administrative burden that continues to cause such strain. Until we do, it is hard to see how any policy changes, regardless of their strengths or weaknesses, can be implemented to their full potential. 

The key priority guiding this reform should be simplification, and a good starting point would be reinstating the Office for Tax Simplification, or a similar body. Since its abolition, there has been no real replacement for its important work in reviewing and recommending ways to make the tax system more efficient.

This work is vital in order for any government to succeed in carrying out its tax plans effectively. HMRC needs a strong administrative and structural foundation, as do the wider departments involved in our tax system. After years of neglect these systems are arguably at breaking point – it’s time to stop patching make-shift repairs and adding to complexities, and instead face head-on the need for holistic reform.

How to make the best of the current situation
Whilst tax agents, and the wider population, can hope for imminent simplifying reforms, the reality of course is that these are still likely to be a way off. In fact, no parties explicitly tackled the issue in their manifestos. So how can individuals navigate the current tangled web of regulations, policies, and proposed changes? 

Understandably, we are already seeing some individuals seeking certainty, whether that is non-doms choosing to leave the UK permanently or prospective private school parents now ruling out fee-paying education for their children. At the other end of the spectrum, people are choosing to bide their time and test the waters after the election before making any changes.

For tax advisors, these are difficult times – we lack certainty or direction from the new government which is understandably still finding its feet. Fortunately, however, the principles that guide our work remain the same: transparency and understanding, underpinned by rigorous knowledge. 

As ever, we are combing through the existing regulations, and all the potential changes suggested by different parties, to build as detailed an understanding as we can of the current picture, and what this may look like now post-election. We can then communicate what we do know clearly to clients – even if it’s not as much as we’d like – and signal which areas remain unclear.

Alongside detailed knowledge of regulations, it is also more important than ever to have an equally clear understanding of clients’ aims and preferences. From here, we can plot a course that satisfies them, and navigates the conditions – some will prefer to be bolder or more cautious than others, but with the “knowns” and “unknowns” transparently communicated, it is at least possible to be confident that decisions are being taken for a reason, rather than from a guess.

A change in government of course always brings a change in policies, and a certain degree of instability is to be expected. However, after such a prolonged period of economic uncertainty, we need policies which are clear, well-communicated, and think practically about our tax system. The new government needs to look beyond just the first 100 days, or even a year in power, and work to reshape our tax system into one that can flourish, remain resilient in the long term, and cope with inevitable future changes – this is what the system’s users, of all political persuasions, desperately need.