Osbourne's tax relief changes in the March budget

chiefie

A guy in the telegraph today thinks that osbourne's will stop the hrt relief on the day of the budget - March 16th and suggests getting contributions in before then.

Others I see think he can manage the IT issue by asking companies to make everyone only receive basic tax relief for do schemes and claim back any more through tax returns (eg 10% if he sets a level of 30% relief for everyone)

Should be interesting - either way he will want to save some money !

gadgetmind

But what about salary sacrifice, which means that for DC 100% of contributions are employer ones. Some of my sal sac avoids the 60%+ bracket due to personal allowance claw back, so how's the tax going to be handled there?

kidmugsy

gadgetmind wrote: »

Some of my sal sac avoids the 60%+ bracket due to personal allowance claw back, so how's the tax going to be handled there?

Personally, I'd scrap the clawback and just charge 45% income tax from £100k. I'll grant that that doesn't answer the question about employers' pension contributions. Maybe he'll stop pension contributions being 100% deductible expenses in calculation of profit. In fact, now I've suggested it I'll be surprised if he doesn't.

chucknorris

gadgetmind wrote: »

But what about salary sacrifice, which means that for DC 100% of contributions are employer ones. Some of my sal sac avoids the 60%+ bracket due to personal allowance claw back, so how's the tax going to be handled there?

That is a good point for me to bear in mind, because although I tend to class myself as a HRT payer, if it wasn't for my pension contributions, I too would also be paying that 60% tax.

gadgetmind

What's odd is that top rate tax of 40% and pension annual allowance of £255k worked just fine under Labour, but the Conservatives seem to be punishing those very people who've voted for them. I guess we really are all in it together.

TheTracker

kidmugsy wrote: »

Maybe he'll stop pension contributions being 100% deductible expenses in calculation of profit. In fact, now I've suggested it I'll be surprised if he doesn't.

I think more likely a BIK tax on the employee. I've heard 10% floated.

Snakey

Any restriction in tax relief surely has to come hand in hand with stopping salary sacrifice altogether.

Or, fairer still, have employer contributions also be taxable on the employee (together with whatever level of tax relief you are giving everybody else) - because if you're worried about unfairness, why should somebody who gets £55k plus a non-contributory pension scheme where the employer puts in 10% of gross salary, pay less tax than somebody who gets paid £60.5k and makes salary sacrifice contributions of £5.5k?

He would find it difficult to announce anything along those lines on 16 March "with immediate effect" because most people will have done their payroll by then. I know the firm I work for finalises it mid-month.

There's also the problem of the transition - employers don't generally pay over the month's contributions until the following month (on 16 March, most employer and sal sac contributions from the February pay run won't yet have been paid to the pension fund). If you said "From 1 April, 30% uplift and no more salary sacrifice" would the contributions sacrificed in March and paid over in April get both tax relief (in 2015/16) and the uplift (under the new regime)? If not, how could a pension fund distinguish between a March contribution paid in April and an April contribution paid in April, and can their software cope with this without any advance notice?

I am hoping the upshot of all that is that we'll get at least a year before the new rules kick in. Surely he can't give everybody just three weeks to get themselves sorted out (including all the employers having to deal with everybody wanting to renegotiate their salary packages).

kidmugsy wrote: »

In fact, now I've suggested it I'll be surprised if he doesn't.

I do like the idea of the Chancellor running up against his deadline having had a lazy Christmas, doing a quick Google search, finding this thread, and nicking a pastiche of our ideas for the sake of saying he's come up with something.

Aretnap

gadgetmind wrote: »

What's odd is that top rate tax of 40% and pension annual allowance of £255k worked just fine under Labour, but the Conservatives seem to be punishing those very people who've voted for them. I guess we really are all in it together.

Blair and Brown relied on a significant amount of support from natural Tory voters in middle England (me included) for their majority, so were hardly going to kick us in the balls by taking our tax relief away. Plus the country actually had some money in those days, or at least nobody had noticed that we didn't, so there was no pressing need to do it.

On the other hand if Osbourne does kick people like you and me in the balls what are we going to do about it - vote for Corbyn instead? Our votes can more or less be taken for granted now which makes us soft targets - the priority is not to annoy anyone who might realistically be tempted to vote for the Labour party in its current state.

This is not particularly intended as a whinge. I'm aware that I'm fortunate in many ways and a lot of people would kill to have to worry about how to avoid 40% tax. It's just a statement of political reality.

kidmugsy

It's above all the need to raise taxes if the deficit is ever to be brought under control by a government scared to cut expenditure. Apart from anything else, they presumably ca't trust the civil service to cooperate in the intelligent cutting of expenditure because some civil servants would love to ensure that any cuts do maximum damage to a Conservative government. It's not just politicians who are slithery creatures.

bigadaj

Aretnap wrote: »

Blair and Brown relied on a significant amount of support from natural Tory voters in middle England (me included) for their majority, so were hardly going to kick us in the balls by taking our tax relief away. Plus the country actually had some money in those days, or at least nobody had noticed that we didn't, so there was no pressing need to do it.

On the other hand if Osbourne does kick people like you and me in the balls what are we going to do about it - vote for Corbyn instead? Our votes can more or less be taken for granted now which makes us soft targets - the priority is not to annoy anyone who might realistically be tempted to vote for the Labour party in its current state.

This is not particularly intended as a whinge. I'm aware that I'm fortunate in many ways and a lot of people would kill to have to worry about how to avoid 40% tax. It's just a statement of political reality.

Is there poetic justice there for the Torres that supposedly became Labour Party members to vote Corbyn in?