Jeremy Hunt in plea to early retirees: ‘Britain needs you’

Pat38493

Malthusian said:

Pat38493 said:

I've always struggled a bit with the term tax avoidance because there is no clear distinction between tax avoidance, and just doing what pretty much everyone does - paying into a pension is a classic example, especially in recent times where your employer is obliged to enroll you in a scheme unless you proactively opt out - how can it be tax avoidance if it's the law that you will be doing it by default?

The fundamental problem here is that you are seeing "tax avoidance" as a negative, an accusation you have to defend yourself against. By definition, it isn't. Tax avoidance is legal, tax evasion is illegal. "No-one is obliged to order their affairs so that they pay more tax to the Government."
Both HMRC and tax evaders like to blur the lines. HMRC likes to talk about "abusive tax avoidance schemes" but as soon as these schemes fail they become tax evasion schemes. And the promoters of such schemes in turn claim their schemes are legitimate "tax avoidance". But it doesn't change reality.
If I walked up to you in the street and randomly punched you in the noggin, then claimed "it was self-defence guv", it wouldn't mean that the distinction between assault and self-defence is unclear.

Yes I am aware, but what I probably had more in mind is the frequent media stories vilifying one or other celebrity or politician, for "not paying their taxes" but then having to clarify that "there is nothing illegal about what they have done".  I am often left wondering - who is appointing themselves the moral arbiter of  this?  We have even had cases where politicians spouse had to change their tax affairs to pay more tax because of political reasons, even though what they were doing was not illegal.

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Anonymous101

Pat38493 said:

Malthusian said:

Pat38493 said:

I've always struggled a bit with the term tax avoidance because there is no clear distinction between tax avoidance, and just doing what pretty much everyone does - paying into a pension is a classic example, especially in recent times where your employer is obliged to enroll you in a scheme unless you proactively opt out - how can it be tax avoidance if it's the law that you will be doing it by default?

The fundamental problem here is that you are seeing "tax avoidance" as a negative, an accusation you have to defend yourself against. By definition, it isn't. Tax avoidance is legal, tax evasion is illegal. "No-one is obliged to order their affairs so that they pay more tax to the Government."
Both HMRC and tax evaders like to blur the lines. HMRC likes to talk about "abusive tax avoidance schemes" but as soon as these schemes fail they become tax evasion schemes. And the promoters of such schemes in turn claim their schemes are legitimate "tax avoidance". But it doesn't change reality.
If I walked up to you in the street and randomly punched you in the noggin, then claimed "it was self-defence guv", it wouldn't mean that the distinction between assault and self-defence is unclear.

Yes I am aware, but what I probably had more in mind is the frequent media stories vilifying one or other celebrity or politician, for "not paying their taxes" but then having to clarify that "there is nothing illegal about what they have done".  I am often left wondering - who is appointing themselves the moral arbiter of  this?  We have even had cases where politicians spouse had to change their tax affairs to pay more tax because of political reasons, even though what they were doing was not illegal.

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Classic case of some kind of moral judgement being put on Mrs. Sunak by the media. Compare this to Nadhim Zahawi they were effectively treated the same by the media however one seemed a case of tax avoidance where as the other tax evasion.

Also worth noting many are happy to criticize people in the public eye whilst at the same time openly accepting Joe Bloggs the tradesman carrying out jobs for cash and keep it off the books. Peoples morals can be very elastic!

zagfles

Anonymous101 said:

Pat38493 said:

Malthusian said:

Pat38493 said:

I've always struggled a bit with the term tax avoidance because there is no clear distinction between tax avoidance, and just doing what pretty much everyone does - paying into a pension is a classic example, especially in recent times where your employer is obliged to enroll you in a scheme unless you proactively opt out - how can it be tax avoidance if it's the law that you will be doing it by default?

The fundamental problem here is that you are seeing "tax avoidance" as a negative, an accusation you have to defend yourself against. By definition, it isn't. Tax avoidance is legal, tax evasion is illegal. "No-one is obliged to order their affairs so that they pay more tax to the Government."
Both HMRC and tax evaders like to blur the lines. HMRC likes to talk about "abusive tax avoidance schemes" but as soon as these schemes fail they become tax evasion schemes. And the promoters of such schemes in turn claim their schemes are legitimate "tax avoidance". But it doesn't change reality.
If I walked up to you in the street and randomly punched you in the noggin, then claimed "it was self-defence guv", it wouldn't mean that the distinction between assault and self-defence is unclear.

Yes I am aware, but what I probably had more in mind is the frequent media stories vilifying one or other celebrity or politician, for "not paying their taxes" but then having to clarify that "there is nothing illegal about what they have done".  I am often left wondering - who is appointing themselves the moral arbiter of  this?  We have even had cases where politicians spouse had to change their tax affairs to pay more tax because of political reasons, even though what they were doing was not illegal.

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Classic case of some kind of moral judgement being put on Mrs. Sunak by the media. Compare this to Nadhim Zahawi they were effectively treated the same by the media however one seemed a case of tax avoidance where as the other tax evasion.

Also worth noting many are happy to criticize people in the public eye whilst at the same time openly accepting Joe Bloggs the tradesman carrying out jobs for cash and keep it off the books. Peoples morals can be very elastic!

Yes, or attempting to justify benefit fraud because "tax evasion is worse".

Like trying to justify punching someone in the face because knifing them is worse.

bostonerimus

MK62 said:

bostonerimus said:

OldScientist said:

EdSwippet said:

OldScientist said:

Quite... so, I had a salary that, in the latter part of my career was in the top 10% in the UK and, accounted for properly, I won't have paid for my state pension.

Even if you include employer NICs? Those shift the needle a lot, since they never top out.

They are after all a portion of your overall 'compensation' package. That is, if your employer did not have to hand this part of what they make from your efforts over directly to the government, they could instead have paid you a higher salary.

As far as I am aware, the values in the NI record only include the personal ones so I've not included the employer ones.

A full lifetime calculation on the paying in side would include NI, tax, etc. while the outgoings would include pension, use of NHS, roads, schools, etc. In other words, it deserves a far better treatment than a casual post to a forum (if it deserves a treatment at all)!  I am minded of what is written on the US IRS building, "Taxes are what we pay for a civilized society" - simple accounting of money in an out ignores the benefits everyone gets.

I note that the ONS report (https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2021 ) suggesting that just over half gain more in benefits than are taxed (in 2021, the figures were skewed by covid, previously it was just under half) is an instantaneous measure and not a lifetime one.

Various OECD reports have identified the UK SP as one of the worst values for money in the developed world. The benefit just isn't very much for the level of contributions and replaces a small portion of earned income. Of course it's complicated as NI pays for more than SP and cross border comparisons are difficult.

However, for those paying Class 2 NI the UK flat rate SP is a fantastic deal; 35 years of voluntary NI has cost me around £6k and for that I'll get get full SP at age 67. The US equivalent of SP is Social Security and that will pay me 3x the UK SP. It is funded by a 15.3% payroll tax split equally between the employer and the employee, so 7.65% each, and has a lifetime earnings component like the old SERPs. The US SS benefit isn't great when compared with other countries, but it is better than the UK's. For high levels of state pension you should live in the Netherlands or Denmark.

The US might have a higher headline SSec pension but then US retirees have something of a lottery of healthcare provision......you might be better off if you are healthy, perhaps not so much if you aren't.......it's this kind of thing which makes direct comparison of state pension provision, between different countries, very difficult. 

Very good points. Neither the US nor the UK are at the top of the table when it comes to the amount of income that their SP's replace and factors like healthcare are very important in retirement. I'm lucky as I get excellent healthcare in the US at a very reasonable price because I'm a retired state employee. I currently pay $100/ month and I'm responsible for the first $5k of major health costs and I can afford that. When I reach 65 my monthly cost will go up to $300/month, but everything will be covered. Until a few years ago I think the levels of care would have been similar between in the US system and the NHS, but unfortunately the NHS care levels seem to have fallen a lot. The US is good if you have access to good insurance and can afford to pay, but it's complicated and too expensive for many people which is it's big failure. IMO the NHS is the best way to deliver healthcare and it will be a disaster for many people if it is allowed to wither and replaced by anything like a US style system.

Malthusian

Pat38493 said:

Yes I am aware, but what I probably had more in mind is the frequent media stories vilifying one or other celebrity or politician, for "not paying their taxes" but then having to clarify that "there is nothing illegal about what they have done".  I am often left wondering - who is appointing themselves the moral arbiter of  this?  

Politicians have been vilified for having sex with people with the wrong chromosomes. I wouldn't get too hung up about who appoints themselves the moral arbiter of what. There's a time and a place and your tax affairs are not it. 

We have even had cases where politicians spouse had to change their tax affairs to pay more tax because of political reasons, even though what they were doing was not illegal.

Well, Mrs Sunak didn't have to, she could have stayed a non-dom and told her husband to put his big boy pants on and not expect her to boost his poll ratings. Tony Blair had the most unpopular "first lady" in UK history (certainly that I can remember) and still won three elections.
Bear in mind that Mrs Sunak is an heiress; she is clearly very wealthy in her own right but the really big money she hasn't inherited yet. If she had, her decision on becoming "voluntarily UK domiciled" may have been different, who knows. By the time she inherits, Sunak may be long gone to the US lecture circuit, and Mrs Sunak may quietly switch back to non-dom without it causing much of a ripple in UK political salons.
Akshata Murty almost certainly paid a very large wodge of tax to the Indian taxwallah when she was non-dom (and still does, as the tax she pays in India will offset UK liability on her worldwide income). She probably decided that paying a slightly different percentage of her vast wealth in tax was better than her husband losing 100% of his chances to be a head of state in his lifetime.

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Any people whose opinions you care about?
While this can be a good strategy for MSE readers, the lifetime allowance and the annual allowance mean it's unlikely to do much for the "super-rich".

Anonymous101

Malthusian said:

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Any people whose opinions you care about?
While this can be a good strategy for MSE readers, the lifetime allowance and the annual allowance mean it's unlikely to do much for the "super-rich".

There does become a point where some of the mechanisms used by the super rich e.g. family companies become economical for the merely rich. Its all just economies of scale and to the average person not in the public eye then all you need be concerned about is whether it is legal and efficient. Fortunately we're unlikely to have our tax affairs plastered over the tabloids.

NedS

Pat38493 said:

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

and we must remember that one of DWP's objectives is (or was):

https://www.gov.uk/government/publications/department-for-work-and-pensions-single-departmental-plan/department-for-work-and-pensions-single-departmental-plan-2018

Ensure financial security for current and future pensioners by: helping people to increase their pension savings; providing information on their private and state pension provision to enable effective planning for the future; and supporting older people to extend their working lives

by way of providing tax incentives to encourage future pensioners to save for their retirement. DWP (and HMRC) provide the framework and regulations for that programme, with limits to ensure it is not abused, so we should not feel guilty for doing exactly what the government are encouraging us to do.

Also remember that pensions tax relief is essentially a tax deferment scheme whereby you are deferring paying tax now on earnings to instead pay tax at a later date when you actually draw down on those saved earnings, so you are not really gaining anything other than the opportunity to defer your tax liability to a later date (excepting HRT payers in employment becoming BRT payers in retirement, and the 25% tax free lump sum - but that's the incentive, otherwise it would be a pure deferment scheme).

Kim1965

Anonymous101 said:

Pat38493 said:

Malthusian said:

Pat38493 said:

I've always struggled a bit with the term tax avoidance because there is no clear distinction between tax avoidance, and just doing what pretty much everyone does - paying into a pension is a classic example, especially in recent times where your employer is obliged to enroll you in a scheme unless you proactively opt out - how can it be tax avoidance if it's the law that you will be doing it by default?

The fundamental problem here is that you are seeing "tax avoidance" as a negative, an accusation you have to defend yourself against. By definition, it isn't. Tax avoidance is legal, tax evasion is illegal. "No-one is obliged to order their affairs so that they pay more tax to the Government."
Both HMRC and tax evaders like to blur the lines. HMRC likes to talk about "abusive tax avoidance schemes" but as soon as these schemes fail they become tax evasion schemes. And the promoters of such schemes in turn claim their schemes are legitimate "tax avoidance". But it doesn't change reality.
If I walked up to you in the street and randomly punched you in the noggin, then claimed "it was self-defence guv", it wouldn't mean that the distinction between assault and self-defence is unclear.

Yes I am aware, but what I probably had more in mind is the frequent media stories vilifying one or other celebrity or politician, for "not paying their taxes" but then having to clarify that "there is nothing illegal about what they have done".  I am often left wondering - who is appointing themselves the moral arbiter of  this?  We have even had cases where politicians spouse had to change their tax affairs to pay more tax because of political reasons, even though what they were doing was not illegal.

Let's say I decided to live of my wife's savings and pay all my salary into a pension in order to avoid paying a large part of the tax - this is perfectly fine but some people might argue it's "unethical" in some way.

Classic case of some kind of moral judgement being put on Mrs. Sunak by the media. Compare this to Nadhim Zahawi they were effectively treated the same by the media however one seemed a case of tax avoidance where as the other tax evasion.

Also worth noting many are happy to criticize people in the public eye whilst at the same time openly accepting Joe Bloggs the tradesman carrying out jobs for cash and keep it off the books. Peoples morals can be very elastic!

Customers thrust cash at trades in an attempt to avoid vat. Most tradesmen do not want wads of cash, theres only so much a matress can take. 

badmemory

I know one who quotes so much for cash.  Which they don't realise includes the VAT.  He's been through one tax investigation without any bad news & has no intention of ever having to go through another.  But he also knows that some people think they are getting a bargain.  So you can't always blame the trademen.

Kim1965

Accepting cash is a headache i avoid. The banks charge to deposit it
. If not declared its a problem spending it, how do you lose materials. I need the income to max out on pension contributions.