LTA: remove charge from April 2023 and abolish from April 2024

Albermarle

zagfles said:

Albermarle said:

MK62 said:

If Labour profoundly disagree with this policy shift, and it appears that they do, then it's not all that surprising that they will oppose it.....at least they are being straight and up front about that........if they win the next election the LTA will be back.
While the dust is still settling on this bombshell, so details probably aren't fully worked out atm, it would be rather helpful in the coming weeks if they fleshed out exactly what they mean, and if their plans will, should they win the next election, include any measures to retrospectively tax anyone who takes advantage of the LTA's charge removal/abolition in the meantime.
I guess it's a case of wait and see......again.....
My own view is that I think it would be unlikely they'd retrospectively tax anyone, and even if they did, that they'd put anyone who takes advantage of the LTA removal in a worse position than today..........but who knows for sure?

If I was a betting man, then I would say if Labour get in they will not actually in the end reverse the LTA abolition, as it would be too complicated. Plus negative effect on Doctors etc
However including pension pots in IHT calculations ( or partly include over a certain amount for example ) could well be on the agenda.
Even the normally very pro Tory/anti LTA   Daily Express is expressing some reservations. Quote

Labour loves accusing Tory chancellors of helping out their rich mates, so at first I scoffed Shadow Chancellor Rachel Reeves line of attack But the more I look at Hunt's move, the more I see her point. Hunt has just given super-wealthy Britons a massive opportunity to fight back against his own inheritance tax squeeze, by allowing them to pump a small fortune into pensions.

The backlash against Hunt's move will hit all of us. If pensions are seen as a massive IHT tax dodge for the rich, it could tempt Reeves to do more than restore the lifetime allowance.

She could make everybody's pensions subject to IHT.

Plenty of people want to see this happen. Last December, the Institute for Fiscal Studies published a paper arguing that the overly generous tax treatment of pension pots at death needs to be swiftly ended.

Thanks to Hunt, that day has just moved closer.

Families have been handed a tax planning nuclear weapon today, and will be clamouring to use it.Unfortunately, Labour has been handed an opportunity to go nuclear on our pensions, too.

If she does, we'll know who to blame. Jeremy Hunt.

I bet he didn't expect that

The Daily Express! They make the Mail and the Sun look good Have they got bored with freak weather stories and how much house prices are rising per day? I suppose now they're falling they need something else to talk about. Perhaps they need reminding the "super-wealthy" eg those on £360k+ (like company directors, pro footballers and some BBC pundits) can't "pump in" more than £10k a year into their pensions because of the AA taper. But I think that's a bit advanced for the Express.

IHT loophole was clearly deliberate, it started in the coalition days when the Tories wanted to raise IHT threshold but the LibDems blocked it. That would be a good Labour fudge to get around the complication of reintroducing the LTA and be able to avoid claims of backtracking, reintroduce a "cap" but only apply it on inherited pensions. That's what they meant all along. Like Wes meant just the "doctor's" cap

Of course I can not disagree with your comments about the Daily Express. The point was more that they have consistently campaigned against LTA and are rabidly anti Labour. So in this context the tome of the article was quite surprising.

I can see a scenario where people with pots not that far above LTA , could end up worse off than if the LTA had just been increased by inflation.
£1.2 Million pot - today  you can take approx £270K tax free and pay a 25% charge on £130K and what is left when you die no IHT charge 
£1. 2 Million pot - LTA increased by 10% - you can take approx £295K tax free and pay a 25 % LTA charge on £33K and no IHT liability
£1.2 Million pot - as from April 6th - Limited to £270K tax free - no LTA charge - no IHT liability
£1.2 Million pot as from removal of IHT exemption ( if it happens) £270K tax free + potential IHT liability.

The other advantage of Option 2) would be a lack of the current uncertainty.

Pat38493

I try not to read the Express or the Mail in case I get brainwashed in some way....  that said, the few articles I have accidently read, they usually tell the truth....in the last paragraph and the opposite of the implication in the headline...

MK62

zagfles said:

MK62 said:

zagfles said:

Albermarle said:

MK62 said:

If Labour profoundly disagree with this policy shift, and it appears that they do, then it's not all that surprising that they will oppose it.....at least they are being straight and up front about that........if they win the next election the LTA will be back.
While the dust is still settling on this bombshell, so details probably aren't fully worked out atm, it would be rather helpful in the coming weeks if they fleshed out exactly what they mean, and if their plans will, should they win the next election, include any measures to retrospectively tax anyone who takes advantage of the LTA's charge removal/abolition in the meantime.
I guess it's a case of wait and see......again.....
My own view is that I think it would be unlikely they'd retrospectively tax anyone, and even if they did, that they'd put anyone who takes advantage of the LTA removal in a worse position than today..........but who knows for sure?

If I was a betting man, then I would say if Labour get in they will not actually in the end reverse the LTA abolition, as it would be too complicated. Plus negative effect on Doctors etc
However including pension pots in IHT calculations ( or partly include over a certain amount for example ) could well be on the agenda.
Even the normally very pro Tory/anti LTA   Daily Express is expressing some reservations. Quote

Labour loves accusing Tory chancellors of helping out their rich mates, so at first I scoffed Shadow Chancellor Rachel Reeves line of attack But the more I look at Hunt's move, the more I see her point. Hunt has just given super-wealthy Britons a massive opportunity to fight back against his own inheritance tax squeeze, by allowing them to pump a small fortune into pensions.

The backlash against Hunt's move will hit all of us. If pensions are seen as a massive IHT tax dodge for the rich, it could tempt Reeves to do more than restore the lifetime allowance.

She could make everybody's pensions subject to IHT.

Plenty of people want to see this happen. Last December, the Institute for Fiscal Studies published a paper arguing that the overly generous tax treatment of pension pots at death needs to be swiftly ended.

Thanks to Hunt, that day has just moved closer.

Families have been handed a tax planning nuclear weapon today, and will be clamouring to use it.Unfortunately, Labour has been handed an opportunity to go nuclear on our pensions, too.

If she does, we'll know who to blame. Jeremy Hunt.

I bet he didn't expect that

I suppose now they're falling they need something else to talk about. Perhaps they need reminding the "super-wealthy" eg those on £360k+ (like company directors, pro footballers and some BBC pundits) can't "pump in" more than £10k a year into their pensions because of the AA taper. But I think that's a bit advanced for the Express.

That's not exactly the case though - the AA taper might restrict the amount of pension contributions those on £360k+pa can get tax relief on to £10k pa, but it doesn't actually restrict the amount they can put into a pension.......that's the crux of this potential "IHT loophole" it appears the chancellor might have created.....

Yeah, they could pay a 45% AA charge in order to save 40% IHT Brilliant tax planning!

They are going to be paying 45% tax on those earnings either way.........if they don't put it in a pension, they'll pay 45% income tax, and then potentially a further 40% in IHT......putting it in the pension will, as it stands, avoid the IHT.

Mutton_Geoff

zagfles said:

Meanwhile those over 55 and close to/over the LTA in flexible DC schemes can happily stuff their pension with potentially 3 years worth of carry forwards today and another £60k next year and probably the year after, and crystallise the whole lot before that shower have a sniff of power.

You can only "stuff it" with an amount equivalent to current tax year's earnings. I've just done exactly this today. LTA exceeder so had minimised input over last few years. Just retired and planned to start drawdown next month (new tax year) to avoid loss of tax code in this. Been delivered a golden RPI linked handshake by the DB scheme now not having to be commuted/reduced to pay the tax charge (PCLS from SIPP a few years back locked in most of my IP2016). Overnight, my DB pension jumped >25% 

Fag packet calcs shows around £41k headroom on 40% tax I paid this tax year, so I just dumped £33k into my SIPP, HMRC will bump this up to the required £41,250 and the tax return will see to the other £8,250 refunded. A 12.5% profit* for sliding savings through my SIPP then taking it back out as soon HMRC credit the 20% basic rate to the pot. Will deal with Month 1 tax as and when.

The input takes me above £40k for the year, but due to low inputs in previous years, plenty of carry forward to use.

* "profit" calcs - £1k cash into SIPP, HMRC bumps to £1,250 and also refunds a high rate tax payer £250 via tax return. Take £1,250 back out with 25% tax free (£312.50), 40% tax on balance drawn leaves £562.50. Total TFC, taxed drawdown & rebate equals £1,125 for your original £1,000 deposit. More available if you're a 45% or 60% tax payer. Don't do this if you have FP or EP in place!

zagfles

MK62 said:

zagfles said:

MK62 said:

zagfles said:

Albermarle said:

MK62 said:

If Labour profoundly disagree with this policy shift, and it appears that they do, then it's not all that surprising that they will oppose it.....at least they are being straight and up front about that........if they win the next election the LTA will be back.
While the dust is still settling on this bombshell, so details probably aren't fully worked out atm, it would be rather helpful in the coming weeks if they fleshed out exactly what they mean, and if their plans will, should they win the next election, include any measures to retrospectively tax anyone who takes advantage of the LTA's charge removal/abolition in the meantime.
I guess it's a case of wait and see......again.....
My own view is that I think it would be unlikely they'd retrospectively tax anyone, and even if they did, that they'd put anyone who takes advantage of the LTA removal in a worse position than today..........but who knows for sure?

If I was a betting man, then I would say if Labour get in they will not actually in the end reverse the LTA abolition, as it would be too complicated. Plus negative effect on Doctors etc
However including pension pots in IHT calculations ( or partly include over a certain amount for example ) could well be on the agenda.
Even the normally very pro Tory/anti LTA   Daily Express is expressing some reservations. Quote

Labour loves accusing Tory chancellors of helping out their rich mates, so at first I scoffed Shadow Chancellor Rachel Reeves line of attack But the more I look at Hunt's move, the more I see her point. Hunt has just given super-wealthy Britons a massive opportunity to fight back against his own inheritance tax squeeze, by allowing them to pump a small fortune into pensions.

The backlash against Hunt's move will hit all of us. If pensions are seen as a massive IHT tax dodge for the rich, it could tempt Reeves to do more than restore the lifetime allowance.

She could make everybody's pensions subject to IHT.

Plenty of people want to see this happen. Last December, the Institute for Fiscal Studies published a paper arguing that the overly generous tax treatment of pension pots at death needs to be swiftly ended.

Thanks to Hunt, that day has just moved closer.

Families have been handed a tax planning nuclear weapon today, and will be clamouring to use it.Unfortunately, Labour has been handed an opportunity to go nuclear on our pensions, too.

If she does, we'll know who to blame. Jeremy Hunt.

I bet he didn't expect that

I suppose now they're falling they need something else to talk about. Perhaps they need reminding the "super-wealthy" eg those on £360k+ (like company directors, pro footballers and some BBC pundits) can't "pump in" more than £10k a year into their pensions because of the AA taper. But I think that's a bit advanced for the Express.

That's not exactly the case though - the AA taper might restrict the amount of pension contributions those on £360k+pa can get tax relief on to £10k pa, but it doesn't actually restrict the amount they can put into a pension.......that's the crux of this potential "IHT loophole" it appears the chancellor might have created.....

Yeah, they could pay a 45% AA charge in order to save 40% IHT Brilliant tax planning!

They are going to be paying 45% tax on those earnings either way.........if they don't put it in a pension, they'll pay 45% income tax, and then potentially a further 40% in IHT......putting it in the pension will, as it stands, avoid the IHT.

No, it's very unlikely to be a sensible tax dodge.

If they exceeded the AA, paid the 45% tax charge, and then finded they needed the money in their lifetime, they'd end up paying income tax on top. And for the "super-wealthy", probably at 45% or at least 40%. So they'd be taxed twice on the same money probably at 45% both times.

Therefore - it would only make sense for someone who is sure they won't need the money in their lifetime.

If that's the case, then why not give the money away now, and avoid IHT completely if they survive 7 years, and partially if they survive at least 3. Also if they gift out of income, there is no IHT anyway however long they survive. And if they don't want the beneficiary to have it yet (eg a child) they could use some kind of trust.

In the case of terminal illness or even poor health, HMRC can investigate substantial pension contributions within a couple of years of death and can rule them liable for IHT.

So, why would anyone want to pay the 45% AA charge, and then leave their beneficiaries liable for income tax on drawdown (unless they die under 75), when they could just pay the 45% tax and give them the money with no additional taxes?

zagfles

Albermarle said:

zagfles said:

MK62 said:

zagfles said:

Albermarle said:

MK62 said:

If Labour profoundly disagree with this policy shift, and it appears that they do, then it's not all that surprising that they will oppose it.....at least they are being straight and up front about that........if they win the next election the LTA will be back.
While the dust is still settling on this bombshell, so details probably aren't fully worked out atm, it would be rather helpful in the coming weeks if they fleshed out exactly what they mean, and if their plans will, should they win the next election, include any measures to retrospectively tax anyone who takes advantage of the LTA's charge removal/abolition in the meantime.
I guess it's a case of wait and see......again.....
My own view is that I think it would be unlikely they'd retrospectively tax anyone, and even if they did, that they'd put anyone who takes advantage of the LTA removal in a worse position than today..........but who knows for sure?

If I was a betting man, then I would say if Labour get in they will not actually in the end reverse the LTA abolition, as it would be too complicated. Plus negative effect on Doctors etc
However including pension pots in IHT calculations ( or partly include over a certain amount for example ) could well be on the agenda.
Even the normally very pro Tory/anti LTA   Daily Express is expressing some reservations. Quote

Labour loves accusing Tory chancellors of helping out their rich mates, so at first I scoffed Shadow Chancellor Rachel Reeves line of attack But the more I look at Hunt's move, the more I see her point. Hunt has just given super-wealthy Britons a massive opportunity to fight back against his own inheritance tax squeeze, by allowing them to pump a small fortune into pensions.

The backlash against Hunt's move will hit all of us. If pensions are seen as a massive IHT tax dodge for the rich, it could tempt Reeves to do more than restore the lifetime allowance.

She could make everybody's pensions subject to IHT.

Plenty of people want to see this happen. Last December, the Institute for Fiscal Studies published a paper arguing that the overly generous tax treatment of pension pots at death needs to be swiftly ended.

Thanks to Hunt, that day has just moved closer.

Families have been handed a tax planning nuclear weapon today, and will be clamouring to use it.Unfortunately, Labour has been handed an opportunity to go nuclear on our pensions, too.

If she does, we'll know who to blame. Jeremy Hunt.

I bet he didn't expect that

I suppose now they're falling they need something else to talk about. Perhaps they need reminding the "super-wealthy" eg those on £360k+ (like company directors, pro footballers and some BBC pundits) can't "pump in" more than £10k a year into their pensions because of the AA taper. But I think that's a bit advanced for the Express.

That's not exactly the case though - the AA taper might restrict the amount of pension contributions those on £360k+pa can get tax relief on to £10k pa, but it doesn't actually restrict the amount they can put into a pension.......that's the crux of this potential "IHT loophole" it appears the chancellor might have created.....

Yeah, they could pay a 45% AA charge in order to save 40% IHT Brilliant tax planning!

Would they maybe able to add funds without getting tax relief, so no AA charge ? Not via a mainstream provider but via some more specialist wealth management provider? OK, any withdrawals  would probably be subject to income tax but if it was only being used for inheritance purposes, then it could be a work around for the wealthy ? Not 100% sure if it would work or not.

No. Anyway the AA charge is equivalent to getting no tax relief. See reply to MK62.

zagfles

Pat38493 said:

I try not to read the Express or the Mail in case I get brainwashed in some way....  that said, the few articles I have accidently read, they usually tell the truth....in the last paragraph and the opposite of the implication in the headline...

I know the Mail has a reputation for being rabidly right-wing, but it's nowhere near as rabid as the Mirror is left-wing. I find the Mail generally OK, the financial section is quite good for a "tabloid" and although it obviously has a right-wing bias it's generally not rabid drivel of the type you get in the Express and the Mirror. But it's full of the usual tabloid drivel like celebrity gossip. It's a handy scapegoat used by left-wingers when they lose or when people don't buy their arguments.

But for a right-leaning paper I think the Telegraph is the best, for a left-leaning paper the Guardian is generally OK, both are clearly biased, so if you want a balanced view of politics etc read both of them.

zagfles

Albermarle said:

zagfles said:

Albermarle said:

MK62 said:

If Labour profoundly disagree with this policy shift, and it appears that they do, then it's not all that surprising that they will oppose it.....at least they are being straight and up front about that........if they win the next election the LTA will be back.
While the dust is still settling on this bombshell, so details probably aren't fully worked out atm, it would be rather helpful in the coming weeks if they fleshed out exactly what they mean, and if their plans will, should they win the next election, include any measures to retrospectively tax anyone who takes advantage of the LTA's charge removal/abolition in the meantime.
I guess it's a case of wait and see......again.....
My own view is that I think it would be unlikely they'd retrospectively tax anyone, and even if they did, that they'd put anyone who takes advantage of the LTA removal in a worse position than today..........but who knows for sure?

If I was a betting man, then I would say if Labour get in they will not actually in the end reverse the LTA abolition, as it would be too complicated. Plus negative effect on Doctors etc
However including pension pots in IHT calculations ( or partly include over a certain amount for example ) could well be on the agenda.
Even the normally very pro Tory/anti LTA   Daily Express is expressing some reservations. Quote

Labour loves accusing Tory chancellors of helping out their rich mates, so at first I scoffed Shadow Chancellor Rachel Reeves line of attack But the more I look at Hunt's move, the more I see her point. Hunt has just given super-wealthy Britons a massive opportunity to fight back against his own inheritance tax squeeze, by allowing them to pump a small fortune into pensions.

The backlash against Hunt's move will hit all of us. If pensions are seen as a massive IHT tax dodge for the rich, it could tempt Reeves to do more than restore the lifetime allowance.

She could make everybody's pensions subject to IHT.

Plenty of people want to see this happen. Last December, the Institute for Fiscal Studies published a paper arguing that the overly generous tax treatment of pension pots at death needs to be swiftly ended.

Thanks to Hunt, that day has just moved closer.

Families have been handed a tax planning nuclear weapon today, and will be clamouring to use it.Unfortunately, Labour has been handed an opportunity to go nuclear on our pensions, too.

If she does, we'll know who to blame. Jeremy Hunt.

I bet he didn't expect that

The Daily Express! They make the Mail and the Sun look good Have they got bored with freak weather stories and how much house prices are rising per day? I suppose now they're falling they need something else to talk about. Perhaps they need reminding the "super-wealthy" eg those on £360k+ (like company directors, pro footballers and some BBC pundits) can't "pump in" more than £10k a year into their pensions because of the AA taper. But I think that's a bit advanced for the Express.

IHT loophole was clearly deliberate, it started in the coalition days when the Tories wanted to raise IHT threshold but the LibDems blocked it. That would be a good Labour fudge to get around the complication of reintroducing the LTA and be able to avoid claims of backtracking, reintroduce a "cap" but only apply it on inherited pensions. That's what they meant all along. Like Wes meant just the "doctor's" cap

Of course I can not disagree with your comments about the Daily Express. The point was more that they have consistently campaigned against LTA and are rabidly anti Labour. So in this context the tome of the article was quite surprising.

I can see a scenario where people with pots not that far above LTA , could end up worse off than if the LTA had just been increased by inflation.
£1.2 Million pot - today  you can take approx £270K tax free and pay a 25% charge on £130K and what is left when you die no IHT charge 
£1. 2 Million pot - LTA increased by 10% - you can take approx £295K tax free and pay a 25 % LTA charge on £33K and no IHT liability
£1.2 Million pot - as from April 6th - Limited to £270K tax free - no LTA charge - no IHT liability
£1.2 Million pot as from removal of IHT exemption ( if it happens) £270K tax free + potential IHT liability.

The other advantage of Option 2) would be a lack of the current uncertainty.

Well obviously some people would gain more from a higher PCLS if the LTA had been increased, instead of being abolished together with a PCLS cap based on current LTA. Increasing the LTA to the same real terms level as when Labour introduced it in 2006 (which would be over £2.5 million) would have likely have benefitted more people than abolishing it.

But the reason they removed it is probably so people who'd crystallised 100% could build up further pension with no LTA liability.

Albermarle

I know the Mail has a reputation for being rabidly right-wing, but it's nowhere near as rabid as the Mirror is left-wing.

 I think it was over a week of front page headlines in the Mail  about Kier Starmer's famous Durham beer, which came to nothing, which I think shows its priorities.

But for a right-leaning paper I think the Telegraph is the best, for a left-leaning paper the Guardian is generally OK, both are clearly biased, so if you want a balanced view of politics etc read both of them.

I kind of used to think the same, but now if I do buy a paper, I usually buy the Times. The political comment is sort of Centrist/pragmatic/sensible, although the massive weekend lifestyle/holiday/property supplements, do still indicate a certain type of metropolitan, wealthy reader base.

EdSwippet

Pat38493 said:

I try not to read the Express or the Mail in case I get brainwashed in some way....  that said, the few articles I have accidently read, they usually tell the truth....in the last paragraph and the opposite of the implication in the headline... 

See also: Gell-Mann amnesia effect.