Rishi after Pensions Tax Relief

Mick70

Much of the media reporting again that Rishi will be going after Pensions Tax Relief for higher earners , this has been mentioned in the past but now looking more likely , considering how many must be 40% tax payers now it will have a big impact . 
just curious what posters opinions are of this .
capital gains tax also to probably increase , few friends and colleagues have bought property recently (buy to
let ) as pension vehicles rather than paying more into traditional pension pots .
https://www.thetimes.co.uk/article/rishi-sunak-plans-raid-on-tax-relief-for-higher-earners-bdnvn2hqn

cfw1994

Well, despite having been a beneficiary of this tax relief, it has always felt “wrong” to me.  

Why should “the rich” get more beneficial tax relief than those earning less?
I suspect the workings of it might prove tricky, but nothing is impossible, of course.
CGT is always an area where more could be raised.  

Face it, the Country (the world!) has had a fiscal nightmare this year, with months and months more ahead: this will take decades to pay off....

What is your opinion?

Dazed_and_C0nfused

It doesn't have to be complicated.

He could let existing rules for occupational pensions remain (the potentially complicated bit) and restrict "relief at source" to 20/25/30% without it increasing your basic rate tax band, whichever the number crunchers think gets the maximum benefit for the treasury whilst not entirely putting people off pension savings.

That would mean there would still be higher rate relief for some but the bigger share(?) is restricted.

Maybe coupled with a change to legislation which prevents pension schemes starting to use the net pay method from now on and let that wither on the vine, a bit like Gordon Brown(?) did with Married Couple's Allowance.

And as salary sacrifice doesn't attract pension tax relief for the individual that could be left as it is 

arnoldy

I think you need to look at the overall generosity of the UK pension & benefits system. It certainly is the land of milk and honey
1. Amount you can save into a private pension and have all the advantages of a tax wrapper: £40,000pa. Often a few hundred or thousand Euros in Europe.
2. 25% tax free on withdrawal
3. ISA to supplement retirement £20,000 each pa and utterly tax free on way out. Nowhere near as generous elsewhere
4. Personal allowance £12.5k pa each. Meaning a couple could withdraw £33k + utterly tax and NI free. In Sweden I think you pay tax on earnings above about £2,000pa.
5. Astonishingly generous system for crediting years on state pension even if your not earning/contributing NI.
6. Free health care, no insurance, no co-payments, ...
Added together utterly unaffordable and cutting the 40% tax is probably the obviously first step.

Mick70

IF happens would imagine salary sacrifice rules would also be changed 

JoeCrystal

This is all pure speculation of course. I would rather wait until the actual Budget report released in due course. As for my opinion, anything that benefits me personally as a single average Joe would be nice but hopefully, the majority of the tax rises will rest with these who are lucky (or unlucky) enough to be on the higher rate tax allowance  A total overhaul on the Council Taxes rate would be nice as well with more bands to include these with higher property wealth. 

NottinghamKnight

arnoldy said:

I think you need to look at the overall generosity of the UK pension & benefits system. It certainly is the land of milk and honey
1. Amount you can save into a private pension and have all the advantages of a tax wrapper: £40,000pa. Often a few hundred or thousand Euros in Europe.
2. 25% tax free on withdrawal
3. ISA to supplement retirement £20,000 each pa and utterly tax free on way out. Nowhere near as generous elsewhere
4. Personal allowance £12.5k pa each. Meaning a couple could withdraw 357K + utterly tax and NI free. In Sweden I think you pay tax on earnings above about £2,000pa.
5. Astonishingly generous system for crediting years on state pension even if your not earning/contributing NI.
6. Free health care, no insurance, no co-payments, ...
Added together utterly unaffordable and cutting the 40% tax is probably the obviously first step.

I'd agree with that but state pensions are generally far higher in most european countries, though focused on contribution or residency requirements, the basic safety net in the uk is there or all which isn't the case for many in other countries that haven't lived or worked there for much of their lives. Overall it's a combination that is a very costly system to run and our tax rates are much lower than most of our neighbours.

aroominyork

The current rules greatly benefit people who pay 40% tax while earning but pay 20% tax post-retirement. For people earning at 20% and retiring at 20% the key difference is the 25% tax-free lump sum which means that saving into a SIPP rather than ISA offers a 6.25% benefit. If Rishi introduces standard 25% SIPP tax relief but income tax remains at 20%, that SIPP/ISA benefit increases to 13.33%. You just have to make sure that if you transfer funds from ISA to SIPP to take advantage of this benefit (assuming no further rule changes) you do not move yourself into post-retirement higher rate tax territory.

michaels

JoeCrystal said:

This is all pure speculation of course. I would rather wait until the actual Budget report released in due course. As for my opinion, anything that benefits me personally as a single average Joe would be nice but hopefully, the majority of the tax rises will rest with these who are lucky (or unlucky) enough to be on the higher rate tax allowance  A total overhaul on the Council Taxes rate would be nice as well with more bands to include these with higher property wealth. 

Hmm. You and I may have bought similar properties for similar prices with si!molar incomes in the past but due to increasing population and lack of building my home may have increased in value more than hours even though our incomes have remained the same. How does this mean I can afford to pay more annual taxes than you?

I can totally see how it might make sense for me to pay capital gains tax on my windfall gain but can't see how higher ongoing taxes are fair as they are likely to result in my having to sell my home and move into a place smaller than your equivalent t one.

Brynsam

What's the point in asking here for opinions? Nobody knows, so why not just wait and see what happens, given how often this sort of guess has been in the past?

aroominyork

What's the point in people who don't care about opinions reading threads that ask for opinions? Nobody knows.