Income Tax bands frozen till April 2028 view?

RogerPensionGuy

Incom Tax bands frozen till April 2028 view?

I've just about stopped paid employment now and am currently trying to work out the best way of getting maximum value out of my DB and DC pensions still both untouched. 

I've done loads of calculations and I'm happy enough and am planning to keep just under the 40% income tax band by tweaking the DC withdrawals down with any DB scheme inflation uplifts and state pension in 6 years. I'll go in to the 40% if required for a sensible reason but, in essence happy to let DC cook in a pleasant environment etc etc.

Currently the income tax bands are frozen till April 2028 and I really cannot this situation remaining and a government will unfreeze them at least one or 2 years before that date.

As my flexible drawdown can be tweaked it's not a problem. 

I'm just interested about anyone else's view on when unfreezing will occur considering inflation. 

☆☆☆☆

https://www.bbc.com/news/explainers-63635185

Pat38493

To be honest, I think both the main political parties are planning to keep them frozen till 2028.

Reason - freezing these tax bands constitutes a massive income tax rise which hits lower earners even more than higher earners.  Therefore I would think that if Labour were not going to keep that measure, they would be screaming blue murder about it every day because it they could get the public to understand that this freezing or rates is the same as an several percent rise in income tax, they would get a lot of votes out of it, but they would then have to reverse it if they got into power.

kinger101

I think if the freeze on the income tax bands is removed, they'll want to make up the revenue some other way, which will also likely be taxes from income.  So your net position might not alter that much.

I'd have no hesitancy paying 40% income tax on my pension if I thought the pot could sustain it.  While it's not something I'd have planned, it would mean my investments had performed beyond expectations

SouthCoastBoy

Imo, I can't see the thresholds being unfrozen, it's an increase in tax revenue which based on current govt commitments will be required to help balance the books. 

sevenhills

Pat38493 said:

Reason - freezing these tax bands constitutes a massive income tax rise which hits lower earners even more than higher earners.  Therefore I would think that if Labour were not going to keep that measure, they would be screaming blue murder about it every day because it they could get the public to understand that this freezing or rates is the same as an several percent rise in income tax, they would get a lot of votes out of it, but they would then have to reverse it if they got into power.

Labour(and the Conservatives) won't announce any tax changes until very close to the election

nic_c

The government will need to raise more taxes, but stating a "freeze" makes it seem like they are not raising taxes, especially as wages go up. 

RogerPensionGuy

nic_c said:

The government will need to raise more taxes, but stating a "freeze" makes it seem like they are not raising taxes, especially as wages go up. 

Yes indeed, I don't think many people understand just how painful a freeze is, I see a freeze as ongoing because when the freezer is switched off, people will have permanently lost that item and fail to get any natural compounding on it, a very smart way of raking in tax now and with inbuilt savings for governments. 

Silvertabby

Another way of looking at it is that if the personal allowance had only risen by CPI since 2010 then it would have only just reached its current level.

Instead, we have enjoyed the higher level for some time now.  A case of 'jam yesterday for bread tomorrow'?

MattMattMattUK

RogerPensionGuy said:

Incom Tax bands frozen till April 2028 view?

I've just about stopped paid employment now and am currently trying to work out the best way of getting maximum value out of my DB and DC pensions still both untouched. 

I've done loads of calculations and I'm happy enough and am planning to keep just under the 40% income tax band by tweaking the DC withdrawals down with any DB scheme inflation uplifts and state pension in 6 years. I'll go in to the 40% if required for a sensible reason but, in essence happy to let DC cook in a pleasant environment etc etc.

Currently the income tax bands are frozen till April 2028 and I really cannot this situation remaining and a government will unfreeze them at least one or 2 years before that date.

As my flexible drawdown can be tweaked it's not a problem. 

I'm just interested about anyone else's view on when unfreezing will occur considering inflation. 

☆☆☆☆

https://www.bbc.com/news/explainers-63635185

Good, the personal allowance is already far too large, at least with inflation eroding it, it may get down to a reasonable level in a decade or more. I doubt it will be unfrozen in 2028, the cost of doing so is going to be far too expensive, better to never raise it. 

dunstonh

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

p00hsticks

Pat38493 said:

To be honest, I think both the main political parties are planning to keep them frozen till 2028.

Reason - freezing these tax bands constitutes a massive income tax rise which hits lower earners even more than higher earners.  Therefore I would think that if Labour were not going to keep that measure, they would be screaming blue murder about it every day because it they could get the public to understand that this freezing or rates is the same as an several percent rise in income tax, they would get a lot of votes out of it, but they would then have to reverse it if they got into power.

I think the argument against that is that raising tax bands is a blunt instrument that affects all earners. 
Labour might well be looking at other more targeted measures that would benefit the lower earners without also including - or even at the cost of - the higher ones.