Abolished N.I - state pension system

hugheskevi

zagfles said:

hugheskevi said:

It is worth recalling that 2 years ago as Chancellor of the Exchequer, Rishi Sunak announced a big increase to the rate of National Insurance (to 15.05%) and also that the basic rate of income tax would be reduced to 19% in 2024, and then separately pledged during 2022 that income tax would be reduced to 16% by 2029.

Given such a significant change of direction in taxation policy over such a short period, questions have to be asked about whether there is a long-term commitment to a strategy of NI reduction, or whether it is just political opportunism.

In the betting market, the Conservatives are currently given a 10% chance of winning most seats at the next Election, so any long-term ambitions may be of little relevance anyhow.

I think you're looking at the employers' rate there, the employees rate peaked at 13.25% temporarily. 

I suspect the somewhat less cynical reasoning behind the recent switch from income tax reduction plans to NI reduction is the lack of post-COVID recovery in employment, most other countries have seen a good post COVID recovery but the UK hasn't as the number of "long term sick" has increased massively plus increases in early retirement etc. 

So targeting tax cuts at workers rather than more generally at people with other forms of income like investment/, rental, pension etc may be a way to encourage people to stay in/return to work. Similar to the reasoning behind the LTA abolision after years of reducing the threshold. 

You're right, I was mixing up employee and employer rates  

Targeting tax cuts at workers may make sense in the short term given the post COVID work change, but that doesn't explain why in 2022 the long-term ambition was higher NICs and lower income tax, but now the long-term aim is the complete opposite. 

BlackKnightMonty

hugheskevi said:

zagfles said:

hugheskevi said:

It is worth recalling that 2 years ago as Chancellor of the Exchequer, Rishi Sunak announced a big increase to the rate of National Insurance (to 15.05%) and also that the basic rate of income tax would be reduced to 19% in 2024, and then separately pledged during 2022 that income tax would be reduced to 16% by 2029.

Given such a significant change of direction in taxation policy over such a short period, questions have to be asked about whether there is a long-term commitment to a strategy of NI reduction, or whether it is just political opportunism.

In the betting market, the Conservatives are currently given a 10% chance of winning most seats at the next Election, so any long-term ambitions may be of little relevance anyhow.

I think you're looking at the employers' rate there, the employees rate peaked at 13.25% temporarily. 

I suspect the somewhat less cynical reasoning behind the recent switch from income tax reduction plans to NI reduction is the lack of post-COVID recovery in employment, most other countries have seen a good post COVID recovery but the UK hasn't as the number of "long term sick" has increased massively plus increases in early retirement etc. 

So targeting tax cuts at workers rather than more generally at people with other forms of income like investment/, rental, pension etc may be a way to encourage people to stay in/return to work. Similar to the reasoning behind the LTA abolision after years of reducing the threshold. 

Targeting tax cuts at workers may make sense in the short term given the post COVID work change, but that doesn't explain why in 2022 the long-term ambition was higher NICs and lower income tax, but now the long-term aim is the complete opposite. 

That’s because they are making it up as they go along!

zagfles

hugheskevi said:

zagfles said:

hugheskevi said:

It is worth recalling that 2 years ago as Chancellor of the Exchequer, Rishi Sunak announced a big increase to the rate of National Insurance (to 15.05%) and also that the basic rate of income tax would be reduced to 19% in 2024, and then separately pledged during 2022 that income tax would be reduced to 16% by 2029.

Given such a significant change of direction in taxation policy over such a short period, questions have to be asked about whether there is a long-term commitment to a strategy of NI reduction, or whether it is just political opportunism.

In the betting market, the Conservatives are currently given a 10% chance of winning most seats at the next Election, so any long-term ambitions may be of little relevance anyhow.

I think you're looking at the employers' rate there, the employees rate peaked at 13.25% temporarily. 

I suspect the somewhat less cynical reasoning behind the recent switch from income tax reduction plans to NI reduction is the lack of post-COVID recovery in employment, most other countries have seen a good post COVID recovery but the UK hasn't as the number of "long term sick" has increased massively plus increases in early retirement etc. 

So targeting tax cuts at workers rather than more generally at people with other forms of income like investment/, rental, pension etc may be a way to encourage people to stay in/return to work. Similar to the reasoning behind the LTA abolision after years of reducing the threshold. 

You're right, I was mixing up employee and employer rates  

Targeting tax cuts at workers may make sense in the short term given the post COVID work change, but that doesn't explain why in 2022 the long-term ambition was higher NICs and lower income tax, but now the long-term aim is the complete opposite. 

The original intention was that the 1.25% NI rise was temporary and would be replaced with a "health and social care levy" of that amount. Maybe they were expecting the post COVID recovery to eventually appear as it did in other countries ie we were just slower getting back to normal?

Anyway whatever the reason, I don't really think the shift from tax cutting plans to NI cuts is particularly politically opportunistic, as it excludes large numbers of voters particularly pensioners who are good voters. Cutting taxes would likely be more politically opportunistic. 

zagfles

BlackKnightMonty said:

zagfles said:

Grumpy_chap said:

MattMattMattUK said:

Grumpy_chap said:

MattMattMattUK said:

I am sure anyone rational would object to an income tax greater than 50%.

Like everyone with income in the range £100k - £125k

That is the marginal rate, their effective rate is still is still only 37.6% at £125k, although I do agree that the marginal rate cliff edge should be managed, largely by the reduction of the Personal Allowance to £1,000-2,000 to bring it into line with European averages. 

I agree that the cliff edge needs resolving out of the system.
My personal view is that the Personal Allowance should stay in place for all.  This may mean a higher "Additional Rate" and / or the "Additional Rate" starting at a lower threshold. 

The distortion created through withdrawal of the Personal Allowance forces undesirable (and possibly originally unforeseen) outcomes such as excessive SS pension contributions, reluctance to work more hours / take on additional responsibility in role.  The distortion is even greater for parents considering the withdrawal of the childcare provision.

The true marginal rate, when income tax plus NI are considered is 62%.  Even higher in Scotland, 67% as I understand it.  I also understand that the "Top Rate" in Scotland kicks in straight after the 67% band is passed, and that is 50% when Income Tax plus NI are considered.

It's even higher at the moment in the £50-60k range for those claiming child benefit for 2 (or more) children. Add in student loan repayments and someone in that range could be looking at over 71%. It will improve in the new tax year but still looking at over 61% for someone with 2 kids and student loan repayments in the £60-80k range. 

And at the other end of the scale someone on a low income and UC could be looking at a 68% effective marginal rate. 

CB is not income; and repaying something you are not permitted to keep - although galling - should not be characterised within a marginal tax argument.

The HICBC is a tax, it's not a repayment of benefit as such. It's a tax often (probably usually) paid by someone who didn't even receive the CB! It's just as relevant as the personal allowance taper in terms of marginal tax rates. 

BlackKnightMonty

zagfles said:

BlackKnightMonty said:

zagfles said:

Grumpy_chap said:

MattMattMattUK said:

Grumpy_chap said:

MattMattMattUK said:

I am sure anyone rational would object to an income tax greater than 50%.

Like everyone with income in the range £100k - £125k

That is the marginal rate, their effective rate is still is still only 37.6% at £125k, although I do agree that the marginal rate cliff edge should be managed, largely by the reduction of the Personal Allowance to £1,000-2,000 to bring it into line with European averages. 

I agree that the cliff edge needs resolving out of the system.
My personal view is that the Personal Allowance should stay in place for all.  This may mean a higher "Additional Rate" and / or the "Additional Rate" starting at a lower threshold. 

The distortion created through withdrawal of the Personal Allowance forces undesirable (and possibly originally unforeseen) outcomes such as excessive SS pension contributions, reluctance to work more hours / take on additional responsibility in role.  The distortion is even greater for parents considering the withdrawal of the childcare provision.

The true marginal rate, when income tax plus NI are considered is 62%.  Even higher in Scotland, 67% as I understand it.  I also understand that the "Top Rate" in Scotland kicks in straight after the 67% band is passed, and that is 50% when Income Tax plus NI are considered.

It's even higher at the moment in the £50-60k range for those claiming child benefit for 2 (or more) children. Add in student loan repayments and someone in that range could be looking at over 71%. It will improve in the new tax year but still looking at over 61% for someone with 2 kids and student loan repayments in the £60-80k range. 

And at the other end of the scale someone on a low income and UC could be looking at a 68% effective marginal rate. 

CB is not income; and repaying something you are not permitted to keep - although galling - should not be characterised within a marginal tax argument.

The HICBC is a tax, it's not a repayment of benefit as such. It's a tax often (probably usually) paid by someone who didn't even receive the CB! It's just as relevant as the personal allowance taper in terms of marginal tax rates. 

It’s not a tax.

I pay it back in my Self Assessment each year. It sucks. I know.

In our case it was useful for NI credits whilst the kids were wee and my partner was looking after them at home. We could probably just fill out a form to not receive it anymore but maybe we hold out hope that they might treat all families equally (they won’t). Still triple locks eh!

zagfles

BlackKnightMonty said:

zagfles said:

BlackKnightMonty said:

zagfles said:

Grumpy_chap said:

MattMattMattUK said:

Grumpy_chap said:

MattMattMattUK said:

I am sure anyone rational would object to an income tax greater than 50%.

Like everyone with income in the range £100k - £125k

That is the marginal rate, their effective rate is still is still only 37.6% at £125k, although I do agree that the marginal rate cliff edge should be managed, largely by the reduction of the Personal Allowance to £1,000-2,000 to bring it into line with European averages. 

I agree that the cliff edge needs resolving out of the system.
My personal view is that the Personal Allowance should stay in place for all.  This may mean a higher "Additional Rate" and / or the "Additional Rate" starting at a lower threshold. 

The distortion created through withdrawal of the Personal Allowance forces undesirable (and possibly originally unforeseen) outcomes such as excessive SS pension contributions, reluctance to work more hours / take on additional responsibility in role.  The distortion is even greater for parents considering the withdrawal of the childcare provision.

The true marginal rate, when income tax plus NI are considered is 62%.  Even higher in Scotland, 67% as I understand it.  I also understand that the "Top Rate" in Scotland kicks in straight after the 67% band is passed, and that is 50% when Income Tax plus NI are considered.

It's even higher at the moment in the £50-60k range for those claiming child benefit for 2 (or more) children. Add in student loan repayments and someone in that range could be looking at over 71%. It will improve in the new tax year but still looking at over 61% for someone with 2 kids and student loan repayments in the £60-80k range. 

And at the other end of the scale someone on a low income and UC could be looking at a 68% effective marginal rate. 

CB is not income; and repaying something you are not permitted to keep - although galling - should not be characterised within a marginal tax argument.

The HICBC is a tax, it's not a repayment of benefit as such. It's a tax often (probably usually) paid by someone who didn't even receive the CB! It's just as relevant as the personal allowance taper in terms of marginal tax rates. 

It’s not a tax.

I pay it back in my Self Assessment each year. It sucks. I know.

In our case it was useful for NI credits whilst the kids were wee and my partner was looking after them at home. We could probably just fill out a form to not receive it anymore but maybe we hold out hope that they might treat all families equally (they won’t). Still triple locks eh!

It's a tax charge. https://www.gov.uk/child-benefit-tax-charge

It's just as relevant to marginal tax rates as the PA withdrawal taper. That's also removal of something you're no longer entitled to.

JoeCrystal

BlackKnightMonty said:

zagfles said:

BlackKnightMonty said:

zagfles said:

Grumpy_chap said:

MattMattMattUK said:

Grumpy_chap said:

MattMattMattUK said:

I am sure anyone rational would object to an income tax greater than 50%.

Like everyone with income in the range £100k - £125k

That is the marginal rate, their effective rate is still is still only 37.6% at £125k, although I do agree that the marginal rate cliff edge should be managed, largely by the reduction of the Personal Allowance to £1,000-2,000 to bring it into line with European averages. 

I agree that the cliff edge needs resolving out of the system.
My personal view is that the Personal Allowance should stay in place for all.  This may mean a higher "Additional Rate" and / or the "Additional Rate" starting at a lower threshold. 

The distortion created through withdrawal of the Personal Allowance forces undesirable (and possibly originally unforeseen) outcomes such as excessive SS pension contributions, reluctance to work more hours / take on additional responsibility in role.  The distortion is even greater for parents considering the withdrawal of the childcare provision.

The true marginal rate, when income tax plus NI are considered is 62%.  Even higher in Scotland, 67% as I understand it.  I also understand that the "Top Rate" in Scotland kicks in straight after the 67% band is passed, and that is 50% when Income Tax plus NI are considered.

It's even higher at the moment in the £50-60k range for those claiming child benefit for 2 (or more) children. Add in student loan repayments and someone in that range could be looking at over 71%. It will improve in the new tax year but still looking at over 61% for someone with 2 kids and student loan repayments in the £60-80k range. 

And at the other end of the scale someone on a low income and UC could be looking at a 68% effective marginal rate. 

CB is not income; and repaying something you are not permitted to keep - although galling - should not be characterised within a marginal tax argument.

The HICBC is a tax, it's not a repayment of benefit as such. It's a tax often (probably usually) paid by someone who didn't even receive the CB! It's just as relevant as the personal allowance taper in terms of marginal tax rates. 

It’s not a tax.

I pay it back in my Self Assessment each year. It sucks. I know.

In our case it was useful for NI credits whilst the kids were wee and my partner was looking after them at home. We could probably just fill out a form to not receive it anymore but maybe we hold out hope that they might treat all families equally (they won’t). Still triple locks eh!

You are aware that it is possible to get Child Benefit with zero payout but still get NI credits? That would save you so much hassle since you would have no need to pay HICBC! Alas, I don't think this particular option is widely known if I recall correctly.

BlackKnightMonty

JoeCrystal said:

BlackKnightMonty said:

zagfles said:

BlackKnightMonty said:

zagfles said:

Grumpy_chap said:

MattMattMattUK said:

Grumpy_chap said:

MattMattMattUK said:

I am sure anyone rational would object to an income tax greater than 50%.

Like everyone with income in the range £100k - £125k

That is the marginal rate, their effective rate is still is still only 37.6% at £125k, although I do agree that the marginal rate cliff edge should be managed, largely by the reduction of the Personal Allowance to £1,000-2,000 to bring it into line with European averages. 

I agree that the cliff edge needs resolving out of the system.
My personal view is that the Personal Allowance should stay in place for all.  This may mean a higher "Additional Rate" and / or the "Additional Rate" starting at a lower threshold. 

The distortion created through withdrawal of the Personal Allowance forces undesirable (and possibly originally unforeseen) outcomes such as excessive SS pension contributions, reluctance to work more hours / take on additional responsibility in role.  The distortion is even greater for parents considering the withdrawal of the childcare provision.

The true marginal rate, when income tax plus NI are considered is 62%.  Even higher in Scotland, 67% as I understand it.  I also understand that the "Top Rate" in Scotland kicks in straight after the 67% band is passed, and that is 50% when Income Tax plus NI are considered.

It's even higher at the moment in the £50-60k range for those claiming child benefit for 2 (or more) children. Add in student loan repayments and someone in that range could be looking at over 71%. It will improve in the new tax year but still looking at over 61% for someone with 2 kids and student loan repayments in the £60-80k range. 

And at the other end of the scale someone on a low income and UC could be looking at a 68% effective marginal rate. 

CB is not income; and repaying something you are not permitted to keep - although galling - should not be characterised within a marginal tax argument.

The HICBC is a tax, it's not a repayment of benefit as such. It's a tax often (probably usually) paid by someone who didn't even receive the CB! It's just as relevant as the personal allowance taper in terms of marginal tax rates. 

It’s not a tax.

I pay it back in my Self Assessment each year. It sucks. I know.

In our case it was useful for NI credits whilst the kids were wee and my partner was looking after them at home. We could probably just fill out a form to not receive it anymore but maybe we hold out hope that they might treat all families equally (they won’t). Still triple locks eh!

You are aware that it is possible to get Child Benefit with zero payout but still get NI credits? That would save you so much hassle since you would have no need to pay HICBC! Alas, I don't think this particular option is widely known if I recall correctly.

Yes good point. But then you can’t invest the money and make a little something from it before paying it back.

Qyburn

As a former landlord it does bug me that rental income is called "unearned" as if it was some sort of windfall that the landlord wasn't really entitled to. There's work involved, quite a lot relative to the £300 or £400 a month net income we actually received.

But that's all probably an aside, there is a political agenda against private rental for reasons that I don't really understand.

BlackKnightMonty

Qyburn said:

As a former landlord it does bug me that rental income is called "unearned" as if it was some sort of windfall that the landlord wasn't really entitled to. There's work involved, quite a lot relative to the £300 or £400 a month net income we actually received.

But that's all probably an aside, there is a political agenda against private rental for reasons that I don't really understand.

I completely agree - as a landlord myself I recognise all of that.