Tax on Savings to rise?

Glen_Clark

Apparently Osborne wants to rename National Insurance 'Earnings Tax' He says this is because he wants to increase tax transparency (try not to laugh)
So what is he really up to?
Is this the first step to having one bigger tax so it can be charged on savings and share dividends too?

Thrugelmir

No one was laughing when Brown promised not to raised income tax. Which he didn't. However in the small print of one years budget he raised National Insurance for the following year.

Seems as if Osborne is playing either smart ahead of the election. Or has longer term plans for simplifying the tax system.

bowlhead99

It is of course easy to be cynical whenever any politician says or does anything. However I think your fears may be unfounded; UK tax law has long differentiated between earned income and unearned income (e.g. random page discussing the difference here ).

By specifically calling it an earnings tax they are acknowledging it is a tax which is how we all see it, but it would seem quite a stretch for either of the parties to then levy this "earnings tax" on what the tax rules and regs call "unearned income" (i.e. savings, investment interest/divi or rental income).

Glen_Clark

Well I cannot believe politicians want to increase tax transparency. Because if people realised how much they were paying there would be an outcry. Which leaves me guessing what he is really up to. I guessed they will need more money from somewhere for Daves 'Money no Object' promise when Tory on Thames got flooded, and Osborne's promising our cheque book to the Ukraine.
I suppose it could be just another attack on 'benefit' claimants who said they are only claiming on the National Insurance premiums they have paid.

ColdIron

Glen_Clark wrote: »

Because if people realised how much they were paying there would be an outcry

I do rather believe this is the whole point, it's a tax pure and simple but an opaque one on earnings hence the name 'Earnings Tax'

I suppose it could be just another attack on 'benefit' claimants who said they are only claiming on the National Insurance premiums they have paid.

The insurance aspect of this ceased many years ago, if it ever was true. To characterise it as some sort of contributory health or retirement scheme is dishonest and misleading. It is simply another tax, the receipts of which are spent immediately by the government on general expenditure and therefore a stealth tax

giffnockhibee

I suspect Osborne's plan is to merge NICs and Income Tax, so that the new tax will catch those in retirement, who generally do not pay NICs.

ColdIron

giffnockhibee wrote: »

I suspect Osborne's plan is to merge NICs and Income Tax, so that the new tax will catch those in retirement, who generally do not pay NICs.

Political suicide by either party, therefore it'll never happen

jackyann

I am of the generation that believed we paid NI contributions, as insurance for unemployment, sickness & disability & for a pension. That is as it was intended for the best part of the 20th century, and that is why I believe I am "entitled" to my State Pension, and for maternity benefit (the only other one I ever claimed)

Whilst this new suggestion recognises that the NI pot has not been run as it should by successive governments, I would be sorry to see NI go. I believe the next step is scrap any "entitlement" to benefits, and give them only to the needy; we will then all pay into private insurance schemes, which will cherry-pick, and the devil take the hindmost.

Thrugelmir

Political suicide by either party, therefore it'll never happen

Once the personal allowance reaches it's threshold. Then more bands of income tax seem a logical step forward. As will raise more revenue. Block a number of artificial methods of reducing liability, in particular employees NIC. So of benefit to everyone in terms of fairness.

Tax may well have to rise to bridge the budget deficit gap.

talexuser

Discounting any future plans, sneaky or otherwise, it's a good thing. Calling it insurance is a misuse of the English language - it is a tax that is spent on current expenditure and interest payments.

I highly suspect the hidden agenda is another "newspeak" attack on benefits since the oft repeated "I paid in my insurance for X years so now I am entitled" will become less of a seemingly valid argument. It all adds a little to blame our current situation on the welfare state rather than incompetent economic management from the top.

As far as the future is concerned as well as minimising the value of savings by rock bottom interest rates I cannot see how the debt can be reduced without tax rises, the level of growth from services and inflated house prices without REALLY significant export growth has not got a chance.

N1AK

jackyann wrote: »

I am of the generation that believed we paid NI contributions, as insurance for unemployment, sickness & disability & for a pension. That is as it was intended for the best part of the 20th century, and that is why I believe I am "entitled" to my State Pension, and for maternity benefit (the only other one I ever claimed)

With respect, you may 'believe' it but you didn't. If you had paid insurance that was going to cover your pension then there would be a large pot of money (either ringfenced, or in general government savings) to show for it. What you did was pay tax and NI and all that money was spent on other things like policing, the military, healthcare etc.

THAT is exactly the issue with NI. People think/believe that they have contributed to a system and thus are entitled to that money back. It's a myth and a con, just like someone who buys into a ponzi scheme 'believes' they are going to get rich.