Tax and N.I. merger & pension

STILTON

Hi all,
I would like the forums views on the suggested merger of N.Ins.
and income tax, relating to people retired and in receipt of a pension, be it state or private.
Will one have to pay the extra tax ( suggested about 30% basic ) or would ones tax allowance be uprated.
I feel one would if ones pension is above the SP.
Your thoughts please.
Regards
Stilton

le_loup

My thoughts are that you are worrying your pretty little head unnecessarily.

Your_Hero

I think the merger of tax and NI would be a nightmare to administer. As you mentioned, pensioners may end up having to pay more tax overall (32% income tax and NI combined), although I'm sure this is not what they want to achieve and would be some work-arounds to this.

However, it does create other issues such as tax on savings and dividends, pensions which are currently exempt from NI, but won't be under this new proposal.

So I do think we are a very long way from this, as there would be several issues to iron out before we even come close.
Whatever happens, this would be above your control and no point worrying.

noh

Your_Hero wrote: »

.................................
However it does create other issues such as tax on savings and dividends, pensions which are currently exempt from NI, but won't be under this new proposal.................

I haven't seen anything to suggest that tax on savings, dividends and pensions will be affected by the proposal, do you have a link?
As I understand it it will be an employment tax and therefore will only affect income from employment on which an individual currently pays NI.

Your_Hero

noh wrote: »

I haven't seen anything to suggest that tax on savings, dividends and pensions will be affected by the proposal, do you have a link?
As I understand it it will be an employment tax and therefore will only affect income from employment on which an individual currently pays NI.

There won't be 2 taxation systems running parallel again, i.e. an "employment" tax vs a "retiree" tax, this would defeat the purpose of NI and Income tax merging. It's designed to simply the current UK tax system, so the intention is one single tax table.

And so, if this new Income tax rate prevails, it will affect all elements of income that are taxable.

I've just googled Tax and NI merger to find some links for you. Some more information here:
http://www.thisismoney.co.uk/money/news/article-2674942/Merging-National-Insurance-Income-Tax-Change-throw-light-tax-burden-obstacles-overcome.html

http://www.independent.co.uk/news/uk/politics/radical-tory-tax-plan-spells-the-end-of-national-insurance-9571800.html

noh

There won't be two systems but there will be different rates as there is now.
The rates on savings income and dividends are different to the rates on income from employment.
I have seen no proposals from official sources that suggest that the new merged tax rate would apply to anything other than income from employment.

jamesd

Different rates would hardly be a simplification. It'd be more complicated than what we have today. At least NI has a clear purpose to justify its use, why it's not paid on non-earned income and why there's a difference in say state pensions for those who pay in and those who don't.

This government has been blurring those distinctions, though, perhaps most notably with the flat rate state pension which has the workers paying for state pensions for those who don't work so that the benefits budget from normal taxation won't do that so much any more.

zygurat789

noh wrote: »

There won't be two systems but there will be different rates as there is now.
The rates on savings income and dividends are different to the rates on income from employment.
I have seen no proposals from official sources that suggest that the new merged tax rate would apply to anything other than income from employment.

That's because they have, like you, a problem with pensions.

noh

zygurat789 wrote: »

That's because they have, like you, a problem with pensions.

What problem do I have with pensions?

zygurat789

jamesd wrote: »

Different rates would hardly be a simplification. It'd be more complicated than what we have today. At least NI has a clear purpose to justify its use, why it's not paid on non-earned income and why there's a difference in say state pensions for those who pay in and those who don't.

This government has been blurring those distinctions, though, perhaps most notably with the flat rate state pension which has the workers paying for state pensions for those who don't work so that the benefits budget from normal taxation won't do that so much any more.

We already have diferent rates for diferent types of income and diferent rates for diferent levels of income.
Ni may have had a clear purpose once upon a time but that went years ago and we shall shortly have a flat rate pension.
What we will end up with is a stepped % according to income, much as we have now with 20%, 40% & 45% but starting lower down the income scale with a lower percentage which will ensure that those who don't pay NI now don't end up with a higher tax rate.

System

Is the proposal to abolish employers' NI too? And do what - merge it with corporation tax?