General Election 2015 – Tax Implications?

Nick_C

Whoever wins the election, taxes need to go up to help to deal with the budget deficit. If the Conservatives lead the next coalition, my bet is a rise in VAT. Our current rate of 20% is quite low compared to the rest of the EU. An increase to 21% could raise an additional £5 billion a year.

Hungary.....27%
Denmark.....25%
Croatia.....25%
Sweden......25%
Romania.....24%
Finland.....24%
Greece......23%
Ireland.....23%
Poland......23%
Portugal....23%
Italy.......22%
Slovenia....22%
Belgium.....21%
Czech.......21%
Spain.......21%
Latvia......21%
Lithuania...21%
Netherlands.21%
Bulgaria....20%
Estonia.....20%
France......20%
Austria.....20%
Slovakia....20%
UK..........20%
Germany.....19%
Cyprus......19%
Malta.......18%
Luxembourg..17%


Sources:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf and
http://www.ifs.org.uk/bns/bn09.pdf

Cyberman60

michaels wrote: »

So if the 25% can not be relied on either then surely an isa or btl is better than a pension. Worst hit will be public sector employees on a full NAL salary scheme who could see a tax bill greater than their salaries if they get a pay rise....

A mixture of investments is best but bear in mind that there is no income tax relief before your money goes into an ISA, so the pension gets an extra 20% boost. Therefore, I'd contribute to a pension first and then any additional saving after tax put into an ISA.

BTL is risky IMO due to potential dodgy tenants, capital gains tax, income tax, interest rates rising, maintenance, agents fees etc. It can work but I'd go for the pension option first.

Cyberman60

Nick_C wrote: »

Whoever wins the election, taxes need to go up to help to deal with the budget deficit. If the Conservatives lead the next coalition, my bet is a rise in VAT. Our current rate of 20% is quite low compared to the rest of the EU. An increase to 21% could raise an additional £5 billion a year.

Hungary.....27%
Denmark.....25%
Croatia.....25%
Sweden......25%
Romania.....24%
Finland.....24%
Greece......23%
Ireland.....23%
Poland......23%
Portugal....23%
Italy.......22%
Slovenia....22%
Belgium.....21%
Czech.......21%
Spain.......21%
Latvia......21%
Lithuania...21%
Netherlands.21%
Bulgaria....20%
Estonia.....20%
France......20%
Austria.....20%
Slovakia....20%
UK..........20%
Germany.....19%
Cyprus......19%
Malta.......18%
Luxembourg..17%


Sources:
http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf and
http://www.ifs.org.uk/bns/bn09.pdf

5 Billion is a drop in the ocean when we consider that the annual deficit is 100 Billion. I'd prefer more welfare cuts such as only allowing child benefit for the first two kids, and no benefits to obese and alcoholics to start with. Let's encourage people to get their lives in order !!

chucknorris

Jonbvn wrote: »

LABOUR – PARTY POLICY ON TAX

• A return of the 50% rate for additional rate tax payers
• Reintroduction of the 10% starting rate of income tax
• A cessation of higher rate income tax relief on pension contributions

Wow! That was news to me. Oh well if labour win then I have to retire next year. At least it takes the decision out of my hands, retiring would be a 'no brainer'.

The only thing that was making me consider working on, was that (surprisingly) in the new incoming Teachers' pension scheme rules, they ignore previously purchased additional pension (in the old scheme), and allow you to buy the new max total of £6,500 (despite having bought the max under the old scheme).

I don't think it is worth working longer if I didn't get the 40% pension relief, so sorry labour no more tax (from earned income) from me or my employer then.


EDIT: Wait a moment, hold the retirement! How would they stop me getting 40% tax relief on it? If my salary is reduced by the pension contribution, surely that means that I would actually get 40% relief?! Because my income would be dropping out of the higher rate tax. I can see how they could do it for lump sum contributions, but how would they do it for payments coming out of your gross salary?

CLAPTON

Cyberman60 wrote: »

A mixture of investments is best but bear in mind that there is no income tax relief before your money goes into an ISA, so the pension gets an extra 20% boost. Therefore, I'd contribute to a pension first and then any additional saving after tax put into an ISA.

BTL is risky IMO due to potential dodgy tenants, capital gains tax, income tax, interest rates rising, maintenance, agents fees etc. It can work but I'd go for the pension option first.

the point is that there is no tax on money earned within your ISA or when to take it out as income

with a pension, whilst you get tax relief on the way in, you pay tax on the way out.

with tax relief at 40% it was a no brainer but if tax relief is limited to 20% then not much difference between an ISA or a private pension
if your emplyer contributes then that's another thing.

chucknorris

CLAPTON wrote: »

the point is that there is no tax on money earned within your ISA or when to take it out as income

with a pension, whilst you get tax relief on the way in, you pay tax on the way out.

with tax relief at 40% it was a no brainer but if tax relief is limited to 20% then not much difference between an ISA or a private pension
if your emplyer contributes then that's another thing.

Totally agree, it is the end of pensions as we know it. If they win the election of course, that might just be the policy that stops them winning. There must be some undecided voters who enjoy their 40% pension tax relief.

Cyberman60

CLAPTON wrote: »

the point is that there is no tax on money earned within your ISA or when to take it out as income

with a pension, whilst you get tax relief on the way in, you pay tax on the way out.

with tax relief at 40% it was a no brainer but if tax relief is limited to 20% then not much difference between an ISA or a private pension
if your emplyer contributes then that's another thing.

Point taken, but remember that currently there is a 25% tax free lump sum available from pension on retirement, and that tax is only payable above the lower rate band which will soon probably be 12500 pounds. My current pension which I live reasonably well on is well below that level so I pay zero tax on it anyway. I think you may well be overplaying the amount of tax you'd pay on a pension.

CLAPTON

Cyberman60 wrote: »

Point taken, but remember that currently there is a 25% tax free lump sum available from pension on retirement, and that tax is only payable above the lower rate band which will soon probably be 12500 pounds. My current pension which I live reasonably well on is well below that level so I pay zero tax on it anyway. I think you may well be overplaying the amount of tax you'd pay on a pension.

that's a fair point for the current situation, however it's seen by many that the 25% tax free withdrawal is unlikely to last.

the current fashion for increasing the number of voters that have no stake in the income tax system may not last either

no taxation without representation may become
no representation without taxation

chucknorris

Cyberman60 wrote: »

Point taken, but remember that currently there is a 25% tax free lump sum available from pension on retirement, and that tax is only payable above the lower rate band which will soon probably be 12500 pounds. My current pension which I live reasonably well on is well below that level so I pay zero tax on it anyway. I think you may well be overplaying the amount of tax you'd pay on a pension.

Problem is though that some will only get 20% relief, but pay tax at the higher rate from their pension income, we certainly would on lump sum pension contributions.

Cyberman60

chucknorris wrote: »

Problem is though that some will only get 20% relief, but pay tax at the higher rate from their pension income, we certainly would on lump sum pension contributions.

The answer is not to put all of your money in one pot but have a mixture of investments. Have a modest pension but also own a house and a lot of ISAs. Pensions for some wealthy have been used in the past for extreme tax avoidance and that is why governments are cracking down, perfectly reasonably IMO.