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SIPP Wealth Tax?

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torrence
torrence Posts: 95 Forumite
10 Posts
edited 17 June 2020 at 2:46PM in Savings & investments
A recent poll suggested a WT on anyone with net assets over £750,000, which allowing for property equity would hit many - but still the minority - of people. As most the electorate do not have net assets of £750,000 it would be an easy target for raising taxes if not soon then the next Labour government.

If you save into a SIPP whatever is in the SIPP an easy target for valuing based on assets. Whereas property or amounts in an ISA could at least be realised relatively quickly and gifted away to family e.g. as early inheritance, to reduce net assets.

I am reluctant to pay any more into my SIPP in this context. Any thoughts on whether non-pension investments would a better choice and more flexible if a WT were to be introduced in future?
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Comments

  • MaxiRobriguez
    MaxiRobriguez Posts: 1,783 Forumite
    Sixth Anniversary 1,000 Posts Name Dropper
    Corbyn got kicked out of position six months ago and the new-new Labour party aren't anywhere close to in power, so the likelihood of punitive wealth taxes occurring any point in the next decade are quite low.

    On the other hand, removing tax benefits to higher rate tax payers for future contributions is a much more likely scenario, and in that case you'd want to front load contributions if you were a HRT.
  • IMHO, just pay your taxes. Or in this case, imagine paying this imaginary tax. You will find that you're better off being wealthier and paying an imaginary tax than being less wealthy and not paying an imaginary tax.
  • torrence
    torrence Posts: 95 Forumite
    10 Posts
    edited 17 June 2020 at 3:13PM
    Corbyn got kicked out of position six months ago and the new-new Labour party aren't anywhere close to in power, so the likelihood of punitive wealth taxes occurring any point in the next decade are quite low.

    On the other hand, removing tax benefits to higher rate tax payers for future contributions is a much more likely scenario, and in that case you'd want to front load contributions if you were a HRT.
    I agree with the logic but as a SRT for me and I imagine for many people HRT and the tax benefit don't apply.
  • bowlhead99
    bowlhead99 Posts: 12,295 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Post of the Month
    edited 17 June 2020 at 3:38PM
    torrence said:
    Corbyn got kicked out of position six months ago and the new-new Labour party aren't anywhere close to in power, so the likelihood of punitive wealth taxes occurring any point in the next decade are quite low.

    On the other hand, removing tax benefits to higher rate tax payers for future contributions is a much more likely scenario, and in that case you'd want to front load contributions if you were a HRT.
    I agree with the logic but as a SRT for me and I imagine for many people HRT and the tax benefit don't apply.
    As a standard / basic or nil rate taxpayer you get basic rate tax relief when contributing to a pension, then the grossed-up amount can accumulate over the years inside the pension with no taxation inside the pension on gains and dividends from year to year, and then when you take the money out you only need to pay tax on 75% of the money (because of tax free lump sum) on the way out, even though you got tax relief on 100% of the money on the way in. 

    And although I said 75% is taxable, in practice it might be somewhat less than that because a proportion of it can be taken within the annual personal allowance. If you already have enough pension money between state and private pension to entirely use up your personal allowance from the day you stop working, then it's true that all the 75% would be taxable.  As 25% is not taxable, and you would have got relief on 100% of it on the way in, it is still worth doing it. 

    In some scenarios the Lifetime ISA will be better than a SIPP pension for a basic rate taxpayer who is young enough to qualify for one, but if you're looking to dodge wealth taxes it is difficult to imagine that they would apply a wealth tax to the money accumulating in a pension which will eventually provide a retirement income and stop you being so dependent on the state in your old age , while not applying it to an ISA which can be accessed immediately.
  • Albermarle
    Albermarle Posts: 27,948 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    It could be that money in a pension would be safer from a wealth tax , as in fact you do not own it . It is held for you in trust by the Pension Trustees and is not even taken into account for inheritance tax. 
    Much easier to slap a tax on a mansion .
    More likely for pensions is the ending of HRT as it costs Billions , although it might be simpler to reduce the AA instead as most basic rate taxpayers would not be hurt by this .
    Salary sacrifice 'loophole' could also be in the firing line and maybe a freezing of the LTA , although not sure the latter would save much.
    Seems very unlikely the 25% tax free lump sum would be changed. 
  • torrence
    torrence Posts: 95 Forumite
    10 Posts
    OK maybe I can still safely fund my SIPP. Let's hope it's not counted as "wealth" later on!
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    With the annual contribution limit unchanged and the LTA linked to CPI. The benefits are progressively being eroded without any need to create headline news. The media only ever comments on what is front of their noses. 
  • AlanP_2
    AlanP_2 Posts: 3,520 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    A poll of who?

    Prime Ministers / Chancellors / Party Leaders / MPs or just a random selection of people who have no influence over anything?
  • Daily Mail readers
  • EthicsGradient
    EthicsGradient Posts: 1,261 Forumite
    Sixth Anniversary 1,000 Posts Photogenic Name Dropper
    torrence said:
    A recent poll suggested a WT on anyone with net assets over £750,000, which allowing for property equity would hit many - but still the minority - of people. As most the electorate do not have net assets of £750,000 it would be an easy target for raising taxes if not soon then the next Labour government.

    If you save into a SIPP whatever is in the SIPP an easy target for valuing based on assets. Whereas property or amounts in an ISA could at least be realised relatively quickly and gifted away to family e.g. as early inheritance, to reduce net assets.

    I am reluctant to pay any more into my SIPP in this context. Any thoughts on whether non-pension investments would a better choice and more flexible if a WT were to be introduced in future?
    Who commissioned the poll? Remember, poll questions are often asked to make a political point; in this case, it could be to get something to print and frighten the readers with. What were the questions (both the one specifying £750k, and the related ones)? This might give an indication if the question was being asked in earnest (eg because a real political party had actually suggested that number, or it was a real political party trying to judge reaction) or if it was just clickbait for a website, or fearmongering for a political opponent.
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