Budget - Basic Rate Tax relief only for higher earners

RobStaffs

Lots of speculation about this.I had an update from one of the top 5 accountants today and it seems plausible that George Osborne may start this process of phasing this out.This will be pretty annoying if this happens. :mad:

dunstonh

I have seen comments from companies speculating that this will happen whilst others say it wont. Nobody knows at this stage. An adjustment in the annual allowance is also being touted as an option.

Neverland

Higher rate tax relief still costs the government £5-7bn a year in lost income tax

You can see why they might want to redirect that in tax cuts to the less well off when we have high inflation, rising unemployment and virtually zero wages growth

I remember thinking in 2004 or 2005 when Labour unveiled plans to let people put £200k+ a year into their pensions tax free this will never last...

Before then, as I recollect, the amount you could put tax free into a (DC) pension was quite small until you were in your 40s or 50s

So in many ways it was the new regime that was the anomally

atush

I still say (as I did in other threads on this same topic) I don't see it happening. Not only do they want to encourage people to provide for their own retirement, any changes that affect higher earners could have a dampening effect on pensions overall as even lower earners get scared changes will be made.

Also, those HRTaxpayers tend to be substanitally tory/ld voters. That would be cutting off their own noses to spite their own faces.

Neverland

atush wrote: »

I still say (as I did in other threads on this same topic) I don't see it happening. Not only do they want to encourage people to provide for their own retirement, any changes that affect higher earners could have a dampening effect on pensions overall as even lower earners get scared changes will be made.

Also, those HRTaxpayers tend to be substanitally tory/ld voters. That would be cutting off their own noses to spite their own faces.

All those HRTaxpayers are hardly going to vote for even higher taxes from labour are they? :rotfl:

Its in the middle ground that elections are won and lost and the median wage in the UK is only about £25k per annum

I think there are about 4m people who pay 40% tax and maybe 0.2m who pay 50% tax

I'd put the odds at 50:50 right now...

DominicH

Neverland wrote: »

Higher rate tax relief still costs the government £5-7bn a year in lost income tax

I hate this idea that pension tax relief is money that the government is somehow kindly adding to your pension fund. By putting money into a pension, you are deferring income. Therefore it is right and proper that you should defer paying the income tax too. You still have to pay income tax when you receive the pension, at whatever rate applies to you then. If that is lower than 40%, fair enough, because you have sensibly spread your income over your lifetime, knowing that your earning capacity would probably decline.
Removing pension tax relief is effectively double taxation. You're taxed now, and you're taxed again when you receive it.

Neverland

DominicH wrote: »

I hate this idea that pension tax relief is money that the government is somehow kindly adding to your pension fund. By putting money into a pension, you are deferring income. Therefore it is right and proper that you should defer paying the income tax too. You still have to pay income tax when you receive the pension, at whatever rate applies to you then. If that is lower than 40%, fair enough, because you have sensibly spread your income over your lifetime, knowing that your earning capacity would not last for ever.
Removing pension tax relief is effectively double taxation. You're taxed now, and you're taxed again when you receive it.

I had thought about this...

..my response would be the lowering of the lifetime allowance to £1.5m with no real mention of how/when it might be raised means that actually...

...it might not in the future be possible to save enough in a pension scheme to have pay higher rate tax when you take the benefits as income...

unintended consequence of QE I'm sure :rotfl:

tartanterra

Neverland wrote: »

Higher rate tax relief still costs the government £5-7bn a year in lost income tax

It doesn't.

There are myriad ways of being tax efficient, a pension just being one of them.
If one door is closed, then people will just look for another.

Anyone who believes that the government will increase tax revenues to the tune of £7bn a year by closing off higher rate tax relief is deluding themselves.

Neverland

tartanterra wrote: »

It doesn't.

There are myriad ways of being tax efficient, a pension just being one of them.
If one door is closed, then people will just look for another.

Anyone who believes that the government will increase tax revenues to the tune of £7bn a year by closing off higher rate tax relief is deluding themselves.

Really?

Name one other way of escaping higher rate tax that is open to ordinary employees that it easy as contributing their salaries to their pension funds?

The only one I can think of is getting your employer to increase its contributions to your pension...

..and I'm sure the IR has thought of that..

tartanterra

Neverland wrote: »

Really?

Name one other way of escaping higher rate tax that is open to ordinary employees that it easy as contributing their salaries to their pension funds?

The only one I can think of is getting your employer to increase its contributions to your pension...

..and I'm sure the IR has thought of that..

First you claim that the government will gain £7bn by closing down higher rate tax relief; and now you're claiming that this entire £7bn is only claimed by "ordinary employees".

Quite.

Neverland

tartanterra wrote: »

First you claim that the government will gain £7bn by closing down higher rate tax relief; and now you're claiming that this entire £7bn is only claimed by "ordinary employees".

Quite.

I see you are nitpicking rather than answering the question in post #9

Quite