Osbourne's tax relief changes in the March budget

_CC_

saver861 wrote: »

I was thinking the other way. He introduces the 30% this year. Next year whittle it down to 25% and so on. Just slide it away in the hope nobody notices!!!

Wouldn't it be better for him to do the opposite and taper up to a 30% flat rate in time for 2020 when he's likely to be leader? It's the sort of policy direction I think he'll go in as long as Corbyn is opposition leader - taking the center ground.

EdSwippet

tinter wrote: »

With the lifetime allowance, pensions alone do not seem a large enough tax benefit to base your country of abode on. It seems unlikely anyone would recommend moving to the UK thanks to it, so doing the converse also makes little sense.

Sorry, I don't follow your logic. And if you want to pick on the lifetime allowance specifically, then the problem is not so much the existence of a lifetime allowance as its erosion.

After A-day in 2006 a personal pension at the lifetime allowance would buy you a very decent annuity, paying well above the median income level at the time. A decade later the government has more than halved the lifetime allowance in real terms, so that it now buys less than the median income.

Over the same decade the government has also nearly doubled the capital gains rate for higher rate taxpayers, reduced the pensions annual allowance by more than 80%, and introduced both a new 45% tax band and a 60% region at between around £100k and £120k. Pensions in particular have been attacked at virtually every budget over the decade.

All of these combine to reduce the attraction of the UK relative to other countries. I work in a multinational company with offices throughout the world, and many -- in fact most -- of my colleagues are not originally from the UK. Some of them have now been here close to ten years. I have noticed a recent trend towards both avoiding the UK as a destination when moving from one of our offices in other countries, and also towards moving out of the UK and into one of our other offices. Our work is internet based and can be done from, literally, anywhere, so our employees' choice of country of residence is pretty much open.

People with a choice of country will tend to choose to go where they are best treated. And people with a successful track record of one international move usually aren't fazed by the thought of a second one.

tinter

Edswippet, TheTracker - You misunderstand my point. I was not declaring that the system is generous compared to others. Indeed, my entire point is that that lifetime allowance is already low, and as such, the pensions system is not an especially great benefit for those high enough earners able to easily relocate trans-nationally in any case.

Of course, anyone is free to relocate for any reason. Maybe for some this will push them to leave. I'm just indicating that I'm personally doubtful that this change in particular will cause significant numbers to leave. It may well be the tax environment causes some people to avoid the UK, I don't care to go off topic in that direction in any case, I'm just doubtful that this change in particular would be enough to cause a movement of the size to cause concern at government level.

EdSwippet

_CC_ wrote: »

Wouldn't it be better for him to do the opposite and taper up to a 30% flat rate in time for 2020 when he's likely to be leader? It's the sort of policy direction I think he'll go in as long as Corbyn is opposition leader - taking the center ground.

Taking that approach doesn't look to me like centre ground. At least not on a conventional definition of 'centre'.

What it does look like, though, is entirely the type of divisive and underhand approach that Osborne has so far appeared to favour as chancellor.

tinter

I think tapering is too obvious of a cash grab. It would also result in higher rate tax payers just delaying their pension payments until it tapers upwards, so it would only have a marginal impact. If there is a large change I think it would have to be all at once.

TheTracker

tinter wrote: »

Edswippet, TheTracker - You misunderstand my point. I was not declaring that the system is generous compared to others. Indeed, my entire point is that that lifetime allowance is already low, and as such, the pensions system is not an especially great benefit for those high enough earners able to easily relocate trans-nationally in any case.

Of course, anyone is free to relocate for any reason. Maybe for some this will push them to leave. I'm just indicating that I'm personally doubtful that this change in particular will cause significant numbers to leave. It may well be the tax environment causes some people to avoid the UK, I don't care to go off topic in that direction in any case, I'm just doubtful that this change in particular would be enough to cause a movement of the size to cause concern at government level.

Ah ok that's fair enough. As it happens I've twice moved countries, each time was for political/economic reasons in well developed western countries. I wouldn't hesitate to do it again. It's a difficult consequence to measure. A brain drain is a terrible symptom for any economy and difficult to repair or even spot until it has happened. I'm of the mindset that taxing brains and brawn less, not more, would be better for a country including its economy. But that's a political statement so as you suggest best not to go off topic.

saver861

_CC_ wrote: »

Wouldn't it be better for him to do the opposite and taper up to a 30% flat rate in time for 2020 when he's likely to be leader? It's the sort of policy direction I think he'll go in as long as Corbyn is opposition leader - taking the center ground.

Well he has to get the unpopular changes out of the way as much as possible at this stage in their term. The sweeteners are left to the run up to election, so in that sense yes.

However, he has a deficit to try to breakdown and has to be seen to make inroads into that. Everything he does will be dual purpose, for the next election and his personal ambitions.

The current thinking is that they can do as they wish as there is no effective opposition. For stability, any country needs a strong government but also a strong opposition. A weak government or a weak opposition is never a good thing, regardless of the parties involved.

gadgetmind

tinter wrote: »

With the lifetime allowance, pensions alone do not seem a large enough tax benefit to base your country of abode on.

People take a lot of factors into account, and pensions are just one of them. But I do know a number of Doctors who were going to be hit with penalties for exceeding the LTA who have emigrated.

It seems unlikely anyone would recommend moving to the UK thanks to it, so doing the converse also makes little sense.

That argument makes no sense!

If one is saving so very much from higher rate tax relief as that its the only reason to stay in the UK, that would probably suggest they are too generous.

Well, I didn't say that HR tax relief is the only reason to stay in the UK. As for generous, it's letting people save money they have earned for their old age. I see this as being a good thing. Penalising people who do this such that they reduce hours and/or simply up sticks and leave the country I see as being a bad thing.

gadgetmind

EdSwippet wrote: »

I have noticed a recent trend towards both avoiding the UK as a destination when moving from one of our offices in other countries, and also towards moving out of the UK and into one of our other offices. Our work is internet based and can be done from, literally, anywhere, so our employees' choice of country of residence is pretty much open.

Agreed 100%. I have reports/team spread across four continents, and mobility is very high between sites. If HMG decide to tax successful people "until the pips squeak" then they better have good hearing as said people will be a long way away rather quickly!

tinter

gadgetmind wrote: »

As for generous, it's letting people save money they have earned for their old age. I see this as being a good thing. Penalising people who do this such that they reduce hours and/or simply up sticks and leave the country I see as being a bad thing.

Well, all of the proposed changes will still provide some benefit in terms of saving money for old age. Reducing the level of incentive for some groups is not a penalty; apart from the (awful) pensions as ISAs idea the intention is still to give relatively favorable tax treatment to pension contributions.

Also, a flat rate would of course give a greater incentive to save to the majority of the population.