Will MSE lobby the government to raise either PSA or ISA allowance?

masonic

pecunianonolet said:

In which case £20k per year allowance in addition to pension and PSA should be plenty for the vast majority of people. It's really not something that MSE should be campaigning on. They might as well campaign to scrap the 45p tax rate.

I guess I give up as people just don't understand simple economics as it seems. Even Martin Lewis said today that the middle class/earner carries the most burden. Scrapping the 45p tax rate was a stupid move by Kwasi Kwarteng and he should have instead left the 150k level and should have increased it to 48p, get rid of non dom and ensure companies like Starbucks and many others pay tax at source and not transfer all profits, like Starbucks, covered as licence fees to Dublin to pay very low cooperation tax there. https://www.theguardian.com/business/2022/mar/30/starbucks-uk-corporation-tax-profit-administrative-expenses-royalties

It is best not to conflate middle earners with those who have high disposable incomes. There are many middle earners who have expenditure to match their income and little spare at the end of each month. Regardless of your income level, if you have enough left over to save >£20k per year, then you are not facing financial hardship and probably shouldn't be targeted for extra financial support or tax incentives at the expense of the general taxpayer.

enthusiasticsaver

I cannot see why MSE should lobby the government to get already fairly generous tax free allowances on savings.  While interest rates were low it did not pay to put money in ISAs anyway.  Now they are increasing but most do not have £20k spare to save anyway and with  the finances in a fairly dire straits this is not a priority in my opinion.  They probably want people to spend rather than save anyway. 

They have already said they will not raise the PSA allowance as the fiscal drag will bring more tax revenue in which they need. 

jimjames

pecunianonolet said:

In which case £20k per year allowance in addition to pension and PSA should be plenty for the vast majority of people. It's really not something that MSE should be campaigning on. They might as well campaign to scrap the 45p tax rate.

I guess I give up as people just don't understand simple economics as it seems. Even Martin Lewis said today that the middle class/earner carries the most burden. 

I perfectly understand simple economics and totally agree that middle earners are carrying the most burden. That doesn't mean that an allowance of more than £20k per year is required for most people. The average middle earner is unlikely to be able to fill the existing allowance let alone a higher one yet someone on £250k per year is very likely to be able to exceed the current. So increasing the amount will help the higher earner not the middle one. 

cricidmuslibale

In my opinion, there will fairly soon be much more of an argument for MSE to lobby the government to raise the Personal Allowance than either the Personal Savings Allowance or the ISA allowance! By fairly soon I mean within the next 2 to 3 years so there may well be (a) new party or parties in government by then.

Whilst £12570 may seem to many right now to be an entirely reasonable ceiling on the amount of non savings income an individual can earn per year before starting to pay basic rate income tax, quite a lot of very low earners earning just under this amount at the moment and struggling hard to pay all their ever increasing food, heating bills, council tax etc, will be earning more than this amount by 2026, the original date the freezing of this tax threshold was due to end. Frankly, the very last thing folks like this, who are barely managing to get by at present, need is for them to be required to start paying income tax and National Insurance as well!

Unless the government has some way of knowing for sure, which clearly it doesn’t, that inflation, and consequently wage inflation, will be zero or very close to zero between 2026 and 2028, freezing the Personal Allowance for a further two years until 2028 is clearly an even more cruel and heartless thing to do to very low earning individuals and families!

gt94sss2

It could be argued that the personal allowance at £12,570/year is actually too high as it means many don't pay any income tax at all.

However, coming back to demands to increase the Personal Savings Allowance, it may have passed people by but the dividend tax allowance and CGT allowances were actually reduced in the Autumn Statement.

Albermarle

cricidmuslibale said:

In my opinion, there will fairly soon be much more of an argument for MSE to lobby the government to raise the Personal Allowance than either the Personal Savings Allowance or the ISA allowance! By fairly soon I mean within the next 2 to 3 years so there may well be (a) new party or parties in government by then.

Whilst £12570 may seem to many right now to be an entirely reasonable ceiling on the amount of non savings income an individual can earn per year before starting to pay basic rate income tax, quite a lot of very low earners earning just under this amount at the moment and struggling hard to pay all their ever increasing food, heating bills, council tax etc, will be earning more than this amount by 2026, the original date the freezing of this tax threshold was due to end. Frankly, the very last thing folks like this, who are barely managing to get by at present, need is for them to be required to start paying income tax and National Insurance as well!

Unless the government has some way of knowing for sure, which clearly it doesn’t, that inflation, and consequently wage inflation, will be zero or very close to zero between 2026 and 2028, freezing the Personal Allowance for a further two years until 2028 is clearly an even more cruel and heartless thing to do to very low earning individuals and families!

Extra tax infographic — MoneySavingExpert Forum

pecunianonolet

https://www.econstor.eu/bitstream/10419/68957/1/392698242.pdf
https://en.wikipedia.org/wiki/Bracket_creep

masonic

cricidmuslibale said:

In my opinion, there will fairly soon be much more of an argument for MSE to lobby the government to raise the Personal Allowance than either the Personal Savings Allowance or the ISA allowance! By fairly soon I mean within the next 2 to 3 years so there may well be (a) new party or parties in government by then.

Whilst £12570 may seem to many right now to be an entirely reasonable ceiling on the amount of non savings income an individual can earn per year before starting to pay basic rate income tax, quite a lot of very low earners earning just under this amount at the moment and struggling hard to pay all their ever increasing food, heating bills, council tax etc, will be earning more than this amount by 2026, the original date the freezing of this tax threshold was due to end. Frankly, the very last thing folks like this, who are barely managing to get by at present, need is for them to be required to start paying income tax and National Insurance as well!

Unless the government has some way of knowing for sure, which clearly it doesn’t, that inflation, and consequently wage inflation, will be zero or very close to zero between 2026 and 2028, freezing the Personal Allowance for a further two years until 2028 is clearly an even more cruel and heartless thing to do to very low earning individuals and families!

Someone working full time on the minimum wage will be bringing in substantially more than the PA, so we would mostly be talking about the underemployed and those unable to engage in full time work. This is a much smaller group than those who would benefit from a PA rise. It would seem better to target support at those in that category rather than giving a benefit to anyone with income <£125,000. There's an argument that less targeted support would be exploited by employers to keep their wage bill down. It seems right that employers should pay a sustainable price for their staff and that within that there should be scope for taxation of some of the employment income.

gt94sss2 said:

However, coming back to demands to increase the Personal Savings Allowance, it may have passed people by but the dividend tax allowance and CGT allowances were actually reduced in the Autumn Statement.

Hopefully it hasn't passed many people here by! It's a massive change and I imagine quite a number will need to take action over the next couple of years to avoid a nasty surprise.

sammyjammy

gt94sss2 said:

It could be argued that the personal allowance at £12,570/year is actually too high as it means many don't pay any income tax at all.

However, coming back to demands to increase the Personal Savings Allowance, it may have passed people by but the dividend tax allowance and CGT allowances were actually reduced in the Autumn Statement.

And many that do pay income tax get it back in the form of Universal Credit or Tax credits which require big public sector depts to administer them, take with one hand, give it back with the other.  Totally pointless and costly.

Ocelot

 I would welcome the PSA rates or the ISA contribution rates increasing, but it wouldn't be a priority for any Government, particularly when many are struggling financially.

Whereas I never save enough to fund 20k of new ISA money annually, I do transfer the maximum amount out of taxable FR accounts to ISAs each year, to lower my tax burden. In other words, my annual ISA subscription is generally from already saved money.