Dodwell: does the cost of tax reliefs make sense?

The personal allowance costs the government £195bn a year in tax relief, while inheritance tax exemptions amount to £17bn a year, just some of the numerous reliefs adding to the complexity of the tax system but necessary to determine tax liability. Bill Dodwell, head of the Office for Tax Simplification (OTS), analyses the annual costs to the Exchequer

One of the important stories with any tax is the role that reliefs and exemptions play in defining who actually pays that tax. The most costly relief in the UK is, of course, the personal allowance for income tax, which HMRC estimates costs over £107 billion annually – in the context of a tax bringing in some £195bn. The personal allowance ensures that about 16m people do not pay income tax at all – leaving that £195bn shared among 31m individuals.

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