Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential merits of aligning the tax rates for passive income with those for earned income; and what assessment she has made of the potential fiscal and social impact of such a reform.

Currently, different forms of income, such as employment income and non-employment income (including from property, dividends and capital gains), are subject to different tax rates reflecting their differing nature and to support the government’s broader policy objectives.

There have been recent changes to bring the tax treatment of passive income more closely aligned with salaried income. For example, the Dividend Allowance and the Annual Exempt Amount on Capital Gains Tax have been reformed and reduced to make the system fairer by bringing the treatment of investment income closely in line with employment income, whilst still ensuring that individuals are not taxed on low levels of dividend income or Capital Gains.

When considering changes to tax policy, the government considers the fiscal and distributional impacts of any potential reforms, drawing on analysis from HMRC and the Office for Budget Responsibility (OBR), who routinely publish costings and analysis of proposed tax changes at fiscal events. Any changes would need to also consider wider economic impacts resulting from behavioural responses.

The government keeps all areas of the tax system under review to ensure it is fair and supports strong public finances.