Abolished N.I - state pension system

michaels

I paid ni on the money that went into my pension and will pay tax on all but 25% on the way out (actually given the commutation rate on my pension I will probably pay tax on all of it on the way out) giving me a 5% pension saving bonus over an ISA.

If you add say 12% ni to be paid on the way out as well then saving via a pension will be worse than using an ISA and possibly worse than using a general savings account. This is effectively retrospective double taxation of pension savings as the ni is paid twice on the same income!

zagfles

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.

Maybe you should pay NI on it then, like people have to with earned income 

Grumpy_chap

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.

It is an individual's choice to own the BTL as a personal asset.

The individual also had a choice to acquire the BTL within a Ltd Co,. and any salary (but not dividend) then paid by the Ltd Co. would be earned income.

BlackKnightMonty

Grumpy_chap said:

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.

It is an individual's choice to own the BTL as a personal asset.

The individual also had a choice to acquire the BTL within a Ltd Co,. and any salary (but not dividend) then paid by the Ltd Co. would be earned income.

You can offset more costs (mortgage?) via Ltd though; can’t you?

najan49

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.

I considered that this year, but realised that the Child Benefit payment is effectively an interest free loan from the government, so left it as-is.

sammyjammy

mark5 said:

Minimum wage will rise again in April I’m guessing more income tax, NI and employers NI be collected from people having more taxable income so will offset some of the 2% NI reduction?

That'll be win win sooner or later if Minimum wage keeps going up half the country will be on it.

BlackKnightMonty

sammyjammy said:

mark5 said:

Minimum wage will rise again in April I’m guessing more income tax, NI and employers NI be collected from people having more taxable income so will offset some of the 2% NI reduction?

That'll be win win sooner or later if Minimum wage keeps going up half the country will be on it.

Wage compression is not a good thing.

Qyburn

zagfles said:

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.

Maybe you should pay NI on it then, like people have to with earned income 

It should be treated the same as self employed income, and if that means paying some NI then that's fair. 

Qyburn

Grumpy_chap said

It is an individual's choice to own the BTL as a personal asset.

Thats true as well. The "political agenda" point is about the way the Government has been successively changing the tax system so that private rental is disadvantaged compared to other businesses. The political aspect is clear from the way these changes are headlined as "closing loopholes" or ending "perks". So people who made that choice as mentioned now have to decide what to do in light of these subsequent changes.

owl456

michaels said:

I paid ni on the money that went into my pension and will pay tax on all but 25% on the way out (actually given the commutation rate on my pension I will probably pay tax on all of it on the way out) giving me a 5% pension saving bonus over an ISA.

If you add say 12% ni to be paid on the way out as well then saving via a pension will be worse than using an ISA and possibly worse than using a general savings account. This is effectively retrospective double taxation of pension savings as the ni is paid twice on the same income!

I fully agree with you on this, and it's a point that I don't think is made often enough. It's similar to complaints about how people don't pay NI on income from pensions today: the reason is because they already paid NI on it in the first place before it went into the pension pot!

I know there is an argument that says some people can now pay into a pension via salary sacrifice so they won't have paid NI in the first place. But not all employers allow that. Self-employed people don't get that luxury. And even those who do pay in via salary sacrifice now probably haven't done so for their whole lives.

I don't see how you untangle this mess without seriously upsetting at least one of the different groups I mentioned in the last paragraph. Ideally there'd be some way of distinguishing which contributions to a pension had already paid NI and which hadn't, but I can't see how you can retrospectively determine this.

Perhaps if NI were to be completely folded into income tax, we'd have to draw a line under existing pension savings, let them keep existing tax rates, and then give everybody an entirely new, separate, pot, to which the new rules are applied?