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Osbourne's tax relief changes in the March budget
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If the Chancellor decides to make any changes with immediate effect I was just wondering how much of an administrative issue this would create for employers if they had already done their March payroll calculations in terms of employee pension contributions and related tax relief. Clearly this could be unwound had this been done earlier in the year but as it’s the last pay run of the tax year its messier.
For practical reasons I would have thought it would be problematic to introduce the change immediately for payroll deductions – so here’s hoping its delayed until the start of the new tax year in April (or later!)
Any thoughts?
Yes I agree with you that these sort of changes would be pretty much impossible to implement at the drop of a hat. I am hoping that we don' t see any changes to salary sacrifice. I pay into a similar AVC scheme and am hoping worst case scenario any changes effective from April 2017.
You never know though !0 -
Yes I agree with you that these sort of changes would be pretty much impossible to implement at the drop of a hat. I am hoping that we don' t see any changes to salary sacrifice. I pay into a similar AVC scheme and am hoping worst case scenario any changes effective from April 2017.
You never know though !
I agree that payrolls would need time to adjust.
However, I'm sure Treasury would not want to lose the tax revenue that would be lost to tax relief during a 'closing down sale' of tax relief, so will be reluctant to announce anything effective from a later date.
That leaves the horror of some form of anti-forestalling provisions...something around allowing members to continue as they are, but preventing members from increasing contributions above an amount (in which case they face a tax charge), unless they have previously been contributing at that level...similar to the proposals back around 2010.
On the positive side, we then wouldn't be too far off the whole wheel turning, and getting to a position where the whole system needs to be ripped up and start again...which would take us nicely back to something similar to the 2006 Pension Simplification reforms.0 -
Free the dunston one next time too.0
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So all pension contributions will be assessed as salary - I guess that fits with making employer and employee contributions mandatory, otherwise why use a pension at all rather than an ISA if you are currently a higher rate taxpayer and expect to pay basic rate on retirement.
What they don't mention is the NI implications of such a change as currently employer contributions do not attract NI whereas if they get added to salary then as well as paying the income tax there is also 2% (higher rate tax payers) NI so 42% gone before a possible 25% rebate and then another 20% to pay on the whole amount including capital growth on receiving the pension.I think....0 -
Do they have to mess with the taxation of employer contributions if they introduce a flat-rate relief on personal contributions? Why not ban salary sacrifice but still allow normal ER contributions?0
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hugheskevi wrote: »
That leaves the horror of some form of anti-forestalling provisions...something around allowing members to continue as they are, but preventing members from increasing contributions above an amount (in which case they face a tax charge), unless they have previously been contributing at that level...[.
Yes that had crossed my mind I was thinking about lowering my AVC contribution slightly due to going under the 40% tax threshold by a few grand this year but I have left it just in case I find in April I can' t put it up again.0 -
I seriously doubt employers, payroll providers and their software firms are going to be able to deliver that for their March 2016 pay runs if the changes are announced on 16th! My old employer used to pay staff on 18th of the month - so any payroll calculations would have been done well before the budget. So I presume there will have to be some transitional measures.
Hoping in my case that the Government will at least allow payroll contributions requested before the budget to go through under the old arrangements (which would be the easiest way to deal with this) while restricting any changes to contributions after that date.
Talk about making it complicated. Oh what to do...0 -
From the Citywire article:Wells added that those who were on the cusp of paying higher rate income tax could find they were pushed over into 40% tax as their employer contribution was added to their income.
‘If they are nudging the 40% rate, if you add employer contributions [to their income] some people could get taxed at higher rate because it trips them into that band,’ she said.
As well as this, there are very interesting possible interactions with the withdrawal of the personal allowance at £100,000. In the same way that some could be pushed into 40% tax, the threshold at which the Personal Allowance is tapered would expand to capture more at a lower salary level.
That is particularly harsh on those affected (by calculations I've done, it would be capture those earning around £85K if they have decent employer pension contributions), who move from paying marginal tax of 40% and getting 40% relief, to paying a marginal (effective) rate of 60% and getting 25-30% relief.0 -
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