Restriction of pension tax relief to 20%

gadgetmind

hugheskevi wrote: »

It is much easier to talk about abolishing higher/additional rate relief than it is to implement it.

I suspect they'd just give the current £50kpa cap a serious haircut.

kevin52

gadgetmind wrote: »

Try starting from the top line of the payslip, as I did in my earlier message, and I think you'll start to understand it better.

Try dealing with facts if you want to dispute them.

noh

kevin52 wrote: »

Try dealing with facts if you want to dispute them.

It is you who is misunderstanding the facts.
gadgetmind was correct with his explanation in post #9

hugheskevi

I suspect they'd just give the current £50kpa cap a serious haircut.

Another of the simple ways, or even worse, re-awaken the previous restrictions based on annual income (no tax relief at all for those earning over £50K maybe?)

Funny you should mention it - just got a mailshot from Prof Pens saying that

Lowering the amount would lead to large numbers of DB members who earn pretty low amounts getting hit with big tax bills (mostly, but far from exclusively, in the public sector).

You would have people earning, say, £20,000 being deemed as putting in more than whatever limit it was lowered to if they happen to be in a DB scheme and have long-service and get a decent but not spectacular pay-rise.

Pensions are about so much more than tax relief anyway - salary sacrifice and receiving Tax Credits can be (much) more significant but few seem to talk about that.

gadgetmind

kevin52 wrote: »

Try dealing with facts if you want to dispute them.

Please see my earlier post where I explain how it works. If there's anything in there that you don't understand, or feel needs correcting as the numbers aren't right, then please feel free to come back to me.

Meeper

kevin52 wrote: »

If a basic rate taxpayer pays £100 into his pension he gets £20 back from the tax man. If a higher rate taxpayer pays £100 he gets £40 back from the tax man. I know I benefitted from the arrangement in the past, but that doesn't make it right.

This is not correct, and you are confusing two issues.

If a BRT pays £100 (that means that he has already paid tax on that income), he receives £25, meaning that the total contribution is £125. That £100 payment would have come from a £125 gross pay from which the government received £25 in tax originally, so they are giving him the tax back.

If a HRT pays £100 (that means that he has already paid tax on that income), he receives £66.67, meaning that the total contribution is £166.67. That £100 payment would have come from a £166.67 gross pay from which the government received £66.67 in tax originally, so they are giving him the tax back.

gadgetmind

kevin52 wrote: »

If a basic rate taxpayer pays £100 into his pension he gets £20 back from the tax man.

No, this is wrong. Do you understand how pension tax relief works?

If a higher rate taxpayer pays £100 he gets £40 back from the tax man.

Again, you're wrong. Please explain how you calculated that £20 and that £40, and show your working.

zygurat789

Quote:
Originally Posted by kevin52
It makes no more sense than to tax poorer people at a higher rate than the rich.
It makes no more sense than to tax poorer people at a higher rate than the rich

gadgetmind wrote: »

Please explain why you think that is happening, and remember to show your working.

Earn additional £100
Result
Tax credit cut by £41
Income tax £20
NI £12
Net Income £27

We do tax the poor more than the rich because the law makers are rich and are looking after themselves and they don't understand the implications of what they are doing

sw67

I paid into a private pension when i was earning enough with overtime to get 40% tax relief as i know my fund would be taxed at 20% when i take a pension

Now i have dropped under the 40% tax band i have stopped as i get taxed now or later at 20% and would rather keep my savings out of a pension

The goverment are killing private pensions and annuity rates are the final nail in the coffin. In my work most guys have reduced or are stopping pension payments

gadgetmind

zygurat789 wrote: »

Earn additional £100
Result
Tax credit cut by £41
Income tax £20
NI £12
Net Income £27

There are a lot of such "claw back" boundaries in our tax system, at many different levels of income. You need to look at the total percentage tax burden on each individual to see who's paying in the most versus who's taking out the most.