End of 40% tax relief on pensions?

EdInvestor

The quid pro quo might be a biggish increase in the s&s ISA limit and/or an end to higher rate tax relief but an increase in standard tax relief for all, above the basic rate.Or both.

baby_boomer

Old_Slaphead wrote: »

I'm going to make a pension contribution before Wednesday in the hope that, even if they do end HR tax relief with immediate effect, then they won't apply it retrospectively.

Good luck.

If I thought there was the slightest chance of them distinguishing between the first two weeks of a tax year and the last 50 I'd have my cheques in the post today. [The cheques and application forms have already been written - but I'll never stick it in a pension if the higher tax relief is abolished.]

I can also see higher SIPP charges as another unfortunate consequence if the government goes ahead .

Old_Slaphead

baby_boomer wrote: »

Good luck.

If I thought there was the slightest chance of them distinguishing between the first two weeks of a tax year and the last 50 I'd have my cheques in the post today. [The cheques and application forms have already been written - but I'll never stick it in a pension if the higher tax relief is abolished.]

I can also see higher SIPP charges as another unfortunate consequence if the government goes ahead .

S'no real cost - just a matter of transferring some UTs from HL Vantage to HL SIPP. You never know with this Gov't - they do the daftest things (ie 2 grand for scrapping cars - quel bozos !!)

dunstonh

You never know with this Gov't

Which of course is a lot of the problem. Before this one retrospective amendments didnt occur. You used to know that if changes were to come they would typically follow a certain format. This Govt is like a scud missle with the Daily Mail acting as the person aiming it.

jem16

So if they do abolish higher rate tax relief how will this work for those who pay into occupational pensions before tax is taken under PAYE system. For those people it reduces their taxable income and relief is automatic and not via the tax return?

baby_boomer

You'd get less in your pay-packet.

I guess April would be the same, and they'd start in May with a different tax code?

This is the one thing that might hold them back since the same people are being hit by an extension of NI rates in 2009/10.

Any chance of them allowing higher rate tax relief on earnings up to £50K? After all, added complexity has never been a barrier to Gordon in the past :rotfl:

jem16

baby_boomer wrote: »

You'd get less in your pay-packet.

Personally I wouldn't as my salary doesn't go into higher rate tax on its own - its other income that pushes me over.

However it would need to be pretty complex to do so as your taxable pay is your gross pay minus the pension contribution. If that amount is only in the 20% bracket how will they work it out?

baby_boomer

The computer system woudn't have any trouble working out tax based on earnings alone.

If savings are already taken into account in a tax code, they could presumably also make a best guess adjustment?

The bottom line is that there would be more people having to fill in one of those lovely tax returns if this change takes place.

Perhaps Gordon would call an Autumn election to avoid reaping the whirlwind of exasperated form filling voters?

jem16

baby_boomer wrote: »

The computer system woudn't have any trouble working out tax based on earnings alone.

Then it wouldn't give any relief at source.

If savings are already taken into account in a tax code, they could presumably also make a best guess adjustment?

Not in my case. I have asked them not to adjust the tax code as I prefer to do it via my tax return.

The bottom line is that there would be more people having to fill in one of those lovely tax returns if this change takes place.

Probably.

baby_boomer

jem16 wrote: »

Then it wouldn't give any relief at source.

Sorry if that wasn't clear. I meant earnings minus pension contributions - ignoring savings.