Rishi after Pensions Tax Relief

CSL0183

kangoora said:

Remove salary sacrifice, it's a 'perk' that is only available to a select number of employees - maybe a large number but there are certainly a huge number of people who will never get that benefit. My wife has worked for about 6 different employers over the last 30 years and has never worked for a company that offered salary sacrifice. It creates a 2 tier system of tax that only benefits those that work for progressive and/or larger employers in the main.

HRT relief on pension contributions is also another 2 tier system that is even more unfair as the people getting the most benefit are the 'richer' members of society anyway. You have to be earning over £50k to start benefiting (excl. Scotland) from this relief.

Also, I thought I'd throw this in, tax dividends the same as income tax, it's ludicrous that people all over the country are paying themselves the bare minimum to qualify for NI payments and paying less tax than PAYE people just because they get their salary as 'dividends' - although that did backfire spectacularly with the COVID 'furlough' schemes. I did find it quite funny that people who had been (legally) dodging 20% income tax for years started whinging about how little they were getting from government support schemes

Your wife’s employers are tax inefficient and the chief financial officers / Finance directors should be fired for not doing the basics right. 

There are no reasons whatsoever why your wife’s employers are not utilising salary sacrifice. It saves both the employee and employer money. As a result, the majority of private pensions utilise salary sacrifice. 

Your opinion on the subject is due to your wife’s employers being negligent in their tax affairs and it’s based upon “Well if she can’t get it then no one else should” 
It’s a ridiculous argument. 

Why is HRT relief unfair? Surely you should support a one tax rate system then? 20% of £20k earnings is £4k tax, 20% of £100k is £20k tax. Tax by % is already progressive. It stands to reason that HRT payers will get the larger benefit of any tax relief as they are the ones paying higher rates of tax. 

The old beer analogy rings true here...

https://www.townclosefp.co.uk/guest-blog-the-tax-system-explained-in-beer/

CSL0183

A flat rate of pension tax relief set below 32% would penalise millions of basic rate taxpayers who currently receive 32% tax relief through salary sacrifice. Great way to lose the next election. 

There is also double taxation to consider for HR taxpayers. Having to pay money to put money into their funds and then again on withdrawal. 

Salary sacrifice is the biggest challenge though, essentially the government would have to treat employers contributions as a BIK. The pandemonium that this would ensue in the public sector DB schemes would be an absolute nightmare for any government to manage. Think of the outrage this would cause amongst the NHS, Armed Forces, Police and all other areas of the Public sector. A raid on NHS pensions particularly at the minute on the back of Covid would go down like a lead balloon. It would stand to reason that the public sector DB schemes have the most to lose and would ultimately have to close down. Employer contributions in these schemes would have to be known to be taxed as a BIK. Unlike the private sector DC schemes with matched contributions upto a certain point, DB schemes go well beyond this and can be in the region of 25-30% employer contribution to make the schemes work. 

In summary, it will never happen in a month of Sundays as the fallout would be too much for any government to handle or survive from. Go after a Nurses pension and watch all hell break loose. For the private sector it would send the financial markets into meltdown too as contributions into all funds would ultimately drop as people protect their take home pay and cut back on their contributions. 

The_Green_Hornet

As this is a spending review, and not a budget, no taxes will be going up just yet.

It doesn't stop the endless media speculation though.

phillw

garmeg said:

Putting all footballers and celebrities on full PAYE would raise a few quid.

Footballers I can agree they have an employer, but "celebrities" are not necessarily employed by anyone.
Regular presenters of a TV show however clearly seem to be employed.

Albermarle

garmeg said:

Putting all footballers and celebrities on full PAYE would raise a few quid.

You have got my vote 

Albermarle

A flat rate of pension tax relief set below 32% would penalise millions of basic rate taxpayers who currently receive 32% tax relief through salary sacrifice. Great way to lose the next election. 

Probably the large majority of 'ordinary voters ' with salary sacrifice schemes do not really understand it , or what tax relief is .

So with some blah blah it might be something that could be changed without too much electoral fallout .

ratechaser

Albermarle said:

A flat rate of pension tax relief set below 32% would penalise millions of basic rate taxpayers who currently receive 32% tax relief through salary sacrifice. Great way to lose the next election. 

Probably the large majority of 'ordinary voters ' with salary sacrifice schemes do not really understand it , or what tax relief is .

So with some blah blah it might be something that could be changed without too much electoral fallout .

Well given that Boris has now burned his bridges with the working class north, he needs to be careful prodding the chattering middle classes down south that will actually be affected by this... they might be a minority, but a noisy one...

NedS

CSL0183 said:

Salary sacrifice is the biggest challenge though, essentially the government would have to treat employers contributions as a BIK.

IMHO dealing with salary sacrifice is really simple - just make it illegal to use salary sacrifice for pension contributions. That way all pension contributions attract the intended/correct amount of tax relief and you don't have a 2 tier system of those who can and those who can't.

michaels

garmeg said:

Dont forget the extra effective tax relief for those in receipt of tax credits. This changes the effective tax relief via sal sacrifice for a BRT from 32% to 73% due to the 41% tax credits withdrawal rate. Both figures ignore any bonus from any donated employer NI saving.

£100 into a pension costs such people just £27, isn't that right @michaels as this is something you have mentioned previously.

Allegedly.  Although you have excluded 2/3rds of the employer NI saving in your calcs.

If the govt make my marginal tax rate too high I will simply retire early and stop contributing at all.  Despite only working 25 years I have already accrued 35 qualifying years of state pension contributions so I don't get anything for the 25.8% employers and employee NI currently paid on my salary.

CSL0183

NedS said:

CSL0183 said:

Salary sacrifice is the biggest challenge though, essentially the government would have to treat employers contributions as a BIK.

IMHO dealing with salary sacrifice is really simple - just make it illegal to use salary sacrifice for pension contributions. That way all pension contributions attract the intended/correct amount of tax relief and you don't have a 2 tier system of those who can and those who can't.

How would they be able to make it illegal? They would have to make employer contributions illegal then. How would you propose the method employers use to fund their employees schemes?

It begs the question why anyone would want salary sacrifice schemes closed down? Is it a jealousy thing because they themselves are not benefitting from it? “The I don’t get it, so you can’t have it” attitude? That’s a very bitter viewpoint. It can’t be about equality as a lot of the poor working class benefit from salary sacrifice with a jump from 20-32% so what is it? All I can see is bitterness. 

Why should those in the public sector get “Gold plated” DB schemes? Is that fair? Why not complain about that? They don’t get SS but they don’t need too as their pension schemes are very generous in comparison to those in the private sector. 

It stinks of jealousy, that’s all. If you personally are not getting it, go bang on your chief financial officers door and tell them to do their job properly. Move to a company that does have such a scheme but stop with the nonsense of the “I don’t get it, so you shouldn’t either” attitude.