Restriction of pension tax relief to 20%

Zelazny

zygurat789 wrote: »

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



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

That's a separate issue really though - and I agree it is a travesty. Means-tested benefits make for very bad marginal tax rates. The answer is not something you'd like though, based on your posts here. Best solution: abolish means tested benefits. Give everyone a flat rate amount that's just about enough to live on, then tax all earnings above that at a flat rate. Voila, everyone has the same marginal tax rate...

atush

I am not so sure it will happen. No1, because the givt knows they have to increase private pension provision as they don't want to paying for everyone. And 2, because there is a quite high statistical corrleation between 40% taxpayers and their voting trends (which seems to be heavily con/dem).

property.advert

What I do know is that if they force through any reduction in the £50k then more people are going to stick two fingers up to the taxman and look for ways to simply avoid tax.

There is no need to reduce it anyway. They could do exactly as the interest rate relief on mortgages and simply let inflation reduce it year on year until it is so meaningless that it can be withdrawn.

hugheskevi

What I do know is that if they force through any reduction in the £50k then more people are going to stick two fingers up to the taxman and look for ways to simply avoid tax.

Agreed.

Both myself and my partner are higher-rate taxpayers, and pension off all the income in the higher rate tax-band. Eventually that will enable us to retire quite early (along with SS ISAs, etc).

If higher rate relief were abolished, then I'd simply work less hours to reduce income to higher rate threshold (no loss in living standards, as I don't take that income now) - which would mean over my whole career I'd end up working less overall for the same total net payment compared to carrying on at current work patterns, but I'd end up working a bit longer at the end of my career.

chucknorris

I think I would still get 40% relief even if they changed the rules, because I pay for my additional pension (into the teachers pension fund) and receive 20% relief (as I am only a part time lecturer and my salary is not in the 40% tax band).

However because it reduces my overall taxable income which is well into the 40% tax band, I get that additional 20% relief when I submit my self assessment tax return. Unless of course I am missing something, if you think so then please point it out.

RenovationMan

kevin52 wrote: »

It is only right and proper that all pension contributions receive the same (20%) tax relief. Why should the wealthiest receive 40% relief on their contributions when they are in a better position to afford it. It makes no more sense than to tax poorer people at a higher rate than the rich.

We should take this further. Everyone should earn the same salary. Why should a Doctor who works 40hrs per week get so much more than a cleaner who works 60hrs per week? It's unfair.

TH1878

Basic Rate Taxpayer:
Pays £20 tax on every £100 of income, therefore £80 takehome pay

Higher Rate Taxpayer:
Pays £40 tax on every £100 of income, therefore £60 takehome pay

Both make a pension contribution of £80 on which they receive tax relief at source (within their pension) of £20.

Higher rate tax-payer can claim an additional £20 tax relief on their tax return.

Both are in a neutral position to where they started

chucknorris

RenovationMan wrote: »

We should take this further. Everyone should earn the same salary. Why should a Doctor who works 40hrs per week get so much more than a cleaner who works 60hrs per week? It's unfair.

We should force the doctors to clean their own surgeries (unpaid of course), that'll teach them for being so clever!

RenovationMan

chucknorris wrote: »

We should force the doctors to clean their own surgeries (unpaid of course), that'll teach them for being so clever!

How dare they get paid so much? A hospital cleaner is just as capable, he just needs to be given a chance. The world is weighted against the common man.

TH1878

RenovationMan wrote: »

How dare they get paid so much? A hospital cleaner is just as capable, he just needs to be given a chance. The world is weighted against the common man.

Maybe that cleaner should have worked a little bit harder. There are plenty of working class doctors.