Tax relief in 2024 when income tax drops to 19%

NedS

Just wondering what will happen to relief at source tax relief (e.g, SIPPs) when basic rate income tax drops to 19% in 2024. Any guesses if relief at source will stay at 20% (precedent set in Scotland with 19% basic rate tax) or will it drop in line to 19%

If relief stays at 20%, that would obviously give a small advantage to relief at source contributions (e.g, SIPP) over net pay employer schemes for additional (unmatched) contributions.

As someone hoping to retire in 2025, here's hoping 19% is here to stay - I will feel smug in an MSE kind of way having got 20% relief on the way in to be paying 19% on the way out in retirement. Small victories, I know!

Dazed_and_C0nfused

Any guesses if relief at source will stay at 20% (precedent set in Scotland with 19% basic rate tax) or will it drop in line to 19%

The Scottish basic rate is 20%, not sure where you've read otherwise?

Plans are being made to align net pay and relief at source so low earners on net pay schemes don't lose out, in tax relief terms, compared to those in relief at source schemes.

So my money would be on relief at source continuing to be given at the basic rate.

https://www.google.com/url?sa=t&source=web&rct=j&url=https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1028578/FINAL_Pensions_tax_relief_administration_call_for_evidence_response.pdf&ved=2ahUKEwjY0Kv58t_2AhWHasAKHbE1CrIQFnoECEMQAQ&usg=AOvVaw2KkXrT3DYIa9I4KAddqFFB

dunstonh

 Any guesses if relief at source will stay at 20% (precedent set in Scotland with 19% basic rate tax) or will it drop in line to 19%

The precedent is every other change in basic rate tax and basic rate tax relief that has occurred.    Basic rate relief remains the same as basic rate.

MK62

This is all assuming that tax relief on pensions is still in it's current form by 2024.
I understand rumours circulate about this every year, usually pre budget, but it seems there is growing pressure for reform.......the Treasury Committee last year called for "urgent reform" of the entire approach to pension tax relief, and while the govt said they were focussed elsewhere at that time, and that's presumably still the case, who knows by 2024?

IvanOpinion

I would wait to see what actually happens before counting your chickens.  Governments are known to make promises that never happen or get broken (especially the current government).

A lot could happen to the pension system over the next couple of years.  

SouthCoastBoy

Don't understanding the logic of announcing a proposed income tax in two years time. Totally irrelevant and just political. Especially when in real terms taxes will be going up as thresholds aren't increasing.

The_Green_Hornet

SouthCoastBoy said:

Don't understanding the logic of announcing a proposed income tax in two years time. Totally irrelevant and just political. Especially when in real terms taxes will be going up as thresholds aren't increasing.

If the Personal Allowance had gone up just by inflation since 2010 it would be £8,834 for the 2021/22 tax year and not £12,570 as it stands now so in real terms you haven't done too badly.

badmemory

Your wording should be IF rates reduce to 19% from 20% & certainly not when.  Just as likely to go up to 21%.

SouthCoastBoy

The_Green_Hornet said:

SouthCoastBoy said:

Don't understanding the logic of announcing a proposed income tax in two years time. Totally irrelevant and just political. Especially when in real terms taxes will be going up as thresholds aren't increasing.

If the Personal Allowance had gone up just by inflation since 2010 it would be £8,834 for the 2021/22 tax year and not £12,570 as it stands now so in real terms you haven't done too badly.

I'm not so convinced, https://citywire.com/funds-insider/news/budget-2021-tax-burden-will-be-highest-since-1950s-attlee-gov-t/a1574287

Thrugelmir

SouthCoastBoy said:

Don't understanding the logic of announcing a proposed income tax in two years time. Totally irrelevant and just political. Especially when in real terms taxes will be going up as thresholds aren't increasing.

The media tends to focus on one aspect to make headlines rather than the broader direction of travel. Levers that get pulled need to be strategic and have long term impacts. Unlike the knee jerk type of conversation that prevails on the Jeremy Vine show.