Pension tax raid being touted again

jamjar92

I read that Rishi looking again “at pension tax relief for higher earners is another possible target, with the Treasury reviving concerns about whether the 40 per cent rate offered to the better-off is justified. 

Cutting pension tax relief to 20 per cent would raise £11bn, the Institute for Fiscal Studies says.“ according to the mail. 

Would this get people to but more in their pension get 20% tax relief, or 40% tax. Always recently kept mine below 50,000 to prevent high tax child benefit charge anyway. 

garmeg

Quid pro quo - get rid of LTA and/or tax pension income at 20% max. Makes no sense to get 20% relief on way in but pay 40% on some of it on the way out - probably doesnt happen often, but it would be possible.

unkle

It's going to happen, just a matter of when. now seems a good time to do it.

garmeg

unkle said:

It's going to happen, just a matter of when. now seems a good time to do it.

Probably an easier sell if the LTA goes.

Gary1984

What's to stop Higher Rate earners salary sacrificing in instead? Even if you banned the thing called salary sacrifice what's to stop companies offering higher employer pension contributions in lieu of wages, thus achieving the same thing? Or people with their own companies making employer contributions into a Sipp as they do now?

BIK on employer contributions then top up by some % inside the pension? 

arnoldy

I think, bearing in mind the state of public finances, it will be an "and" on top of existing taxes and restrictions. My betting is on:
1. A pseudo NI on retirement income above state pension level - say a 2% charge - you can almost hear the melody of the words...lockdown benefited pensioners...biggest users of NHS etc...
2. Clampdown on Salary Sacrifice
3. Higher rate relief to go, all standardized at 20%
4. "LTA" to be introduced for ISAs - £500k?
5. Clampdown on self employed tax matters - IR35 and measures to ensure payment of NI or equivalent (affecting individuals paying themselves through private Companies, not Sole Traders).

jamjar92

Not sure about a clampdown on salary sacrifice they still want people to save for retirement. Employers like because they save money as well.

garmeg

arnoldy said:

I think, bearing in mind the state of public finances, it will be an "and" on top of existing taxes and restrictions. My betting is on:
1. A pseudo NI on retirement income above state pension level - say a 2% charge - you can almost hear the melody of the words...lockdown benefited pensioners...biggest users of NHS etc...
2. Clampdown on Salary Sacrifice
3. Higher rate relief to go, all standardized at 20%
4. "LTA" to be introduced for ISAs - £500k?
5. Clampdown on self employed tax matters - IR35 and measures to ensure payment of NI or equivalent (affecting individuals paying themselves through private Companies, not Sole Traders).

How would LTA on ISA work though. There is no tax on any withdrawal to start with and values go up and down daily. Can see the contribution limit of £20,000 being reduced to £10,000 or even £5,000 or maybe the ISA scheme being halted altogether for new contributions with some inferior replacement product being put in its place.

Perhaps just raise income tax rates by 5% across the board would be simpler?

Would he want to turn the downturn into a depression though as this is what such a tax hike would likely cause?

arnoldy

garmeg said:

arnoldy said:

4. "LTA" to be introduced for ISAs - £500k?5

How would LTA on ISA work though. There is no tax on any withdrawal to start with and values go up and down daily. Can see the contribution limit of £20,000 being reduced to £10,000 or even £5,000 or maybe the ISA scheme being halted altogether for new contributions with some inferior replacement product being put in its place.

If you limit the amount of money in an ISA tax shelter, then by definition more money is defenseless & can then be taxed on interest, dividends, capital gains. Rightly or wrongly at a time of economic stress people being able to shield 6 & 7 figure sums from tax won't go down well. 

Albermarle

How about 
1) 40% tax relief retained but Annual Allowance reduced to £25K and no possibility to use previous years unused allowances- much simpler administratively .
2) Salary sacrifice stopped as it is just a loophole to avoid NI anyway
3) LTA frozen ( although would not have much effect on 
4) SP triple lock partly removed.

nigelbb

The public spending required during the coronavirus crisis is unprecedented & should be treated in the same way as war debts & funded by borrowing to be repaid over the next 100 years. The increase in the PSBR will be negligible & tax rises unnecessary.