Brown's £500 NI/tax grab and pensions

donaldtramp

With Gordon browns latest grab at taxes with this sneaky little move

http://news.uk.msn.com/Article.aspx?cp-documentid=6454483

An extra £500 tax (in the disguise of NI contributions).

Would this make it worthwhile to opt out of NI payments(which I believe you can do) and invest them for myself?

I'm just sick of funding yet another tax grab by our Comrade Brown.

DT

seven-day-weekend

You can't opt out of NI contributions.

Channelman

seven-day-weekend wrote: »

You can't opt out of NI contributions.

Yea, you can...........just stop working

baby_boomer

The worst thing about this sneaky exercise is that it shows Brown's contempt for Parliament, in contrast to earlier promises .

Such a major measure should have been announced so that it could be properly debated. Unfortunately, we have come to expect such double dealing - witness the last budget "tax cuts" which turned out to be no such thing and in fact hit those on below average incomes with tax increases.

Brown & Darling wanted the headlines to be their generosity to "Middle England" on IHT, not "£500 tax sting". And yet such a major change needed proper justification if we are not to see NI as just another government tax tactic.

But where is the justice in Darling leaving someone on £41K with the same NI increase as someone on £410K ?

2008 is going to see a few belts tightened.

ManAtHome

But if you're a higher-rate taxpayer, you gain over £600 from the basic and low-rate changes. Worst off will be anyone earning around £6-8k (and possibly somebody on very high earnings - sure somebody will be along with the real numbers...).

You can opt out of part of the NI, but you have to put the cash in a pension (not sure if it can go in a SIPP just yet - again, an expert will be along "real soon now"...)

Andy_L

Seeing as how £41k is about 60% more than the average wage they (Reuters?) seem to have an interesting take on the concept of "middle income"

donaldtramp

You can opt out of part of the NI, but you have to put the cash in a pension (not sure if it can go in a SIPP just yet - again, an expert will be along "real soon now"...)

Thats exactly what I'd like to do. We get taxed to the hilt in this country as it is. I'd prefer to pay any money into a personal pension fund, regardless of how little it seems. I'd prefer it in my pocket later on rather than go to fund our government with it's poor management of finances and continually increasing stealth taxes.

I mean what are we going to get from the government at retirement anyway? I'd rather pay it into a personal pension by contracting out.

Just don't know how to go about it.
DT

EdInvestor

donaldtramp wrote: »

I'd prefer it in my pocket later on rather than go to fund our government with it's poor management of finances and continually increasing stealth taxes.

May be worth noting that once you put money into a pension you can't get it out until you are aged 55 and then only 25%.The rest of the capital eventually gets taken by the life company who pay some of it back to you as income and pocket the rest.:(

Old_Slaphead

Wasn't this announced in the March 2007 budget review thingy when GB revealed the 2p cut in standard rate.

Ok, I know it may have been in the 'smallprint' but why's everyone acting kinda surprised? That's the way Mr. Brown communicates 'bad' news.

Overall, from April 2008, for anyone being paid £41,000, the combined effect of tax and NI changes are pretty negligible - it's some of the very low paid singles who are losing out.

Dithering_Dad

Just putting your cash into a pension does not save it from national insurance - just income tax. NI is calculated on your full salary, not salary minus pension contributions.

To save NI you have to get your employer to run a Salary Sacrifice scheme where your actual pay drops by the amount you wish to put into your pension, thereby reducing both tax and NI payments. If you can talk your employer into running such a scheme they could also sacrifice down for childcare vouchers, etc. saving you more money.

BTW, your employer saves an absolute fortune because they have to pay Employers NI (12.8%) on ALL employee earnings above £100, so any reduction in your salary really benefits them. A good bargaining point if your employer doesn't currently run a salary sacrifice scheme.

Dithering_Dad

But where is the justice in Darling leaving someone on £41K with the same NI increase as someone on £410K ?

They do pay different NI though due to the extra 1% that anyone over the HEL threshold has to pay, so if the threshold was 40k, they would both pay the same under 40k and then the £41k guy would pay an extra £10 NI and the £410k guy would pay an extra £3700. Though I suspect that the £410k guy would have much of his money shielded from UK tax and NI.

Speaking from a purely theoretical standpoint, if NI is really a tax for social welfare (state pension, healthcare) and not just another income tax, then there is no reason why someone who earns £1M should pay more than someone who earns 40K - they both get the exact same pension and NHS healthcare opportunities. It's a bit like charging rich people more for a bottle of milk, just because they have more brass.