Pension tax relief

Mick70

Telegraph reporting that pension tax relief for middle earners (and higher) may well get cut back to basic 20%, kick in the teeth for some on here I guess 

does a salary sacrifice scheme get round this and high earners still get full tax relief using that ?  

Mick70

Many folk I know have been investing in holiday lets rather than traditional pension pots as their pension savings 

Dazed_and_C0nfused

Mick70 said:

Telegraph reporting that pension tax relief for middle earners (and higher) may well get cut back to basic 20%, kick in the teeth for some on here I guess 

does a salary sacrifice scheme get round this and high earners still get full tax relief using that ?  

Only the chancellor would know that for the future.

But salary sacrifice of £10,000 currently attracts tax, NI & HICBC relief of £10,566 in very exceptional circumstances (a lot of children!) so by anyone's standards that is extremely generous, being paid by the government to put money into your pension 😳

noclaf

I was wondering about this too in the context of salary sacrifice pension schemes.

If I understand correctly, as of today when I sacrifice my salary that is taxed in the 40% income tax band, I am 'avoiding' paying 40% tax so the whole lot goes into my pension. If higher rate tax relief is removed, curious if it  will impact salary sacrifice schemes and how it work in practice? Appreciate we won't know till 17 Nov.

My other question and a fairly basic one maybe, when the announcements are made on 17 Nov are they likely to be effective immediately or not untill start of the next/new tax year?

Dazed_and_C0nfused

Unlikely to be immediately, probably from midnight that day.

Expect to see a lot of very stressed payroll staff and software developers that day as they implement the changes in a few hours.

noclaf

Dazed_and_C0nfused said:

Unlikely to be immediately, probably from midnight that day.

Expect to see a lot of very stressed payroll staff and software developers that day as they implement the changes in a few hours.

I am paid on/around 17th (mid month cycle) so should be interesting should they wield the axe to tax relief......

Troxy

Without any proper consultation, it’s unlikely that the higher tax relief will be cut. It is hugely complex for DB and salary sacrifice. 

If there are any changes it is more likely to be on on lowering annual allowance although this does have its own unintended consequences - e.g. doctors choosing to work less.

Mick70

If they remove high tax relief then surely would impact salary sacrifice schemes and not just those who claim it back themselves in tax returns , otherwise most companies will simply switch to salary sacrifice payroll schemes , be nightmare to administer 

Mick70

Can’t see annual allowance lowering it’s been frozen anyway so I’m effect it’s is being chipped away as it should be rising .  Will just mean more folk look at other investments instead of pensions ie the holiday let route 

Albermarle

Mick70 said:

Telegraph reporting that pension tax relief for middle earners (and higher) may well get cut back to basic 20%, kick in the teeth for some on here I guess 

does a salary sacrifice scheme get round this and high earners still get full tax relief using that ?  

The article says that pension tax relief costs £42.7 Billion pa , of which £22.9 billion is related to income tax and £19.8 billion related to NI. Presume the latter is due to salary sacrifice, but this is not mentioned anywhere in the article, and it seems very high. ( nearly as much as tax relief) so I suspect the figures are not accurate/badly reported
Apparently a reduction in 40% tax relief to 20% would save about £10 billion.

Of course this story surfaces on a regular basis, but might have more legs in the current situation? Although as already mentioned it is not simple to implement, and I would suspect if anything is announced on  Nov 17th, it will be light on detail and for implementation at some later date.

Marcon

Mick70 said:

Many folk I know have been investing in holiday lets rather than traditional pension pots as their pension savings 

How many is 'many'? I suspect there is far more talk than actual action given the increasing complexities and decreasing tax savings of such an approach.

Mick70 said:

Telegraph reporting that pension tax relief for middle earners (and higher) may well get cut back to basic 20%, kick in the teeth for some on here I guess 

If the Telegraph's reporting it then it must be right(!)....nothing new in this sort of speculation, so why not just wait and see? The devil will always be in the detail, and you can guarantee that'll some time coming.