Taxation. Would it make sense to...

Gracchus_Babeuf

JimmyTheWig wrote: »

They could always increase the amount of pensions to compensate. They could do this at a level to make the move cash-neutral for pensioners but still increase what they bring in from others who earn without working.

Sounds too complicated, given that pensioners often have several different pensions as well as the state pittance.

Gracchus_Babeuf

ILW wrote: »

Or just adjust tax codings.

Seems a better suggestion, but that means the government would have to go back on its recent (bad) decision to equalise the tax thresholds between pensioners and non-pensioners. I doubt that they will u-turn on this.

dori2o

ILW wrote: »

Or just adjust tax codings.

That's a thought.

How about incorporating tax and NI into one rate, and then giving those over state pension age a further allowance.

They could call it the Personal Age Allowance;)

Gracchus_Babeuf

dori2o wrote: »

That's a thought.

How about incorporating tax and NI into one rate, and then giving those over state pension age a further allowance.

They could call it the Personal Age Allowance;)

Even better would be to make pension income free of basic rate income tax, but with the higher rate starting much lower down, say £25k.

ILW

Gracchus_Babeuf wrote: »

Because there is a difference between earned income and pension or investment income. Full time workers earn far more than they would when they retire, for obvious reasons, and in future this will get a lot worse given the abolition of final salary schemes. The average retiree with a continuous working life will in future have not around 60-65% of final salary to live on, but closer to 35-40%.

Still cannot see why someone with a pension income of say £50k should pay more or less tax than someone with an earned income of £50k.

Gracchus_Babeuf

ILW wrote: »

Still cannot see why someone with a pension income of say £50k should pay more or less tax than someone with an earned income of £50k.

You are suggesting that pensioners pay more tax - but when you have worked 45 years or more and paid tax all your life, is it not correct that this should stop at some point? Moreover, few pensioners have incomes of £50k and as I have said earlier, the better off ones should pay more tax.

Jennifer_Jane

For years I've wondered why the Basic State Pension is taxed at all. The way it's worked out is complicated for HMRC, who continually get their sums wrong. Every year I have to phone them to get things changed. It's also complicated for the pensioner, who perhaps is not able to work things out. You leave the ease of PAYE and at an advanced age, you have to fight to keep your tax affairs in order.

It's not a question of paying less tax - anyway I only pay about £39 a month - just the madness of the tax system (where HMRC send a code to your Company pension provider based on what your State Pension is). Inevitably they get this wrong, although I do suggest that they are getting the benefit of this and claiming more tax than they should.

Re NI - I keep asking this, and clearly I keep missing an answer - if NI is merged into general taxation, how will the level of State Pension be determined for people. I get about 62% of the State Pension, as I was out of the Country for 28 years, but sent contributions back to build up my 'years'. How would a merger work? Could anybody just come into the Country and claim the full State Pension or what?

dori2o

Jennifer_Jane wrote: »

For years I've wondered why the Basic State Pension is taxed at all. The way it's worked out is complicated for HMRC, who continually get their sums wrong. Every year I have to phone them to get things changed. It's also complicated for the pensioner, who perhaps is not able to work things out. You leave the ease of PAYE and at an advanced age, you have to fight to keep your tax affairs in order.

It's not a question of paying less tax - anyway I only pay about £39 a month - just the madness of the tax system (where HMRC send a code to your Company pension provider based on what your State Pension is). Inevitably they get this wrong, although I do suggest that they are getting the benefit of this and claiming more tax than they should.

Re NI - I keep asking this, and clearly I keep missing an answer - if NI is merged into general taxation, how will the level of State Pension be determined for people. I get about 62% of the State Pension, as I was out of the Country for 28 years, but sent contributions back to build up my 'years'. How would a merger work? Could anybody just come into the Country and claim the full State Pension or what?

There won't be anything to work out if the Govt go ahead with their plan for a single, fixed state pension, currently thought to be about £140 per week.

Everyone would get the same regardless of NI contributions.

grizzly1911

dori2o wrote: »

There won't be anything to work out if the Govt go ahead with their plan for a single, fixed state pension, currently thought to be about £140 per week.

Everyone would get the same regardless of NI contributions.

Are you sure?

I thought you still had to have 30years NI contribution to get the full amount or have it reduced proportionately.

What ever it gets fixed at there will still be "benefits" to top that up as it still insufficient for many who don't have their own property or additional private pension or savings.