Tax-free lump sum

aroominyork

The IHT benefits of SIPPs are an anomaly that should be addressed. A higher rate taxpaying legator can pass to their heirs £100k for every £60k of net contributions, and if they die before age 75 the heirs can spend that £100k tax free. An ISA is subject to IHT so heirs might receive £36k for every £60k of the legator’s contributions. There is something deeply wrong with a system which encourages people to consider their SIPPs the income source of last resort during retirement.

Albermarle

aroominyork said:

The IHT benefits of SIPPs are an anomaly that should be addressed. A higher rate taxpaying legator can pass to their heirs £100k for every £60k of net contributions, and if they die before age 75 the heirs can spend that £100k tax free. An ISA is subject to IHT so heirs might receive £36k for every £60k of the legator’s contributions. There is something deeply wrong with a system which encourages people to consider their SIPPs the income source of last resort during retirement.

Unused pension pots will be included in IHT calculations from 2027, unless something changes which in this case seems unlikely.

The ability of a beneficiary of a pension pot to withdraw from it income tax free if the person dies before 75, is an anomaly, but is unconnected to IHT. 
It was thought this rule was likely to change but so far this has not been proposed ( not officially anyway ) 

aroominyork

Albermarle said:

aroominyork said:

The IHT benefits of SIPPs are an anomaly that should be addressed. A higher rate taxpaying legator can pass to their heirs £100k for every £60k of net contributions, and if they die before age 75 the heirs can spend that £100k tax free. An ISA is subject to IHT so heirs might receive £36k for every £60k of the legator’s contributions. There is something deeply wrong with a system which encourages people to consider their SIPPs the income source of last resort during retirement.

Unused pension pots will be included in IHT calculations from 2027, unless something changes which in this case seems unlikely.

Yes, and so they should be, although my kids might not thank me for saying it. I'd be happy with IHT being abolished (my wife is from Australia, one of many countries where there is no IHT), but if IHT exists it should be logically applied. 

Albermarle said:

aroominyork said:

The IHT benefits of SIPPs are an anomaly that should be addressed. A higher rate taxpaying legator can pass to their heirs £100k for every £60k of net contributions, and if they die before age 75 the heirs can spend that £100k tax free. An ISA is subject to IHT so heirs might receive £36k for every £60k of the legator’s contributions. There is something deeply wrong with a system which encourages people to consider their SIPPs the income source of last resort during retirement.

The ability of a beneficiary of a pension pot to withdraw from it income tax free if the person dies before 75, is an anomaly, but is unconnected to IHT. 
It was thought this rule was likely to change but so far this has not been proposed ( not officially anyway ) 

It might not strictly be connected to IHT, but it is related to the taxation of inherited assets. Hopefully it is not something our family will benefit from. 

Qyburn

jimjames said:

valiant24 said:

(The constant tinkering and resultant absence of certainty over private pension rules really is scandalous!).

What changes have been made? The only recent one I can think of is actually beneficial by scrapping the LTA

Increase in Annual Allowance as well.

Hoenir

Qyburn said:

jimjames said:

valiant24 said:

(The constant tinkering and resultant absence of certainty over private pension rules really is scandalous!).

What changes have been made? The only recent one I can think of is actually beneficial by scrapping the LTA

Increase in Annual Allowance as well.

In the current environment off the table.  All that furlough money has to be clawed back first. 

aroominyork

Already done, Hoenir, from £40k to £60k in FY24.

Hoenir

aroominyork said:

Already done, Hoenir, from £40k to £60k in FY24.

Worse than that. There's no inflation linking. Stealth taxation. 

cockerWalker

A possibly unpopular opinion on a savings and investment forum, but a wealth tax would help a lot. I've never understood an economic basis (as opposed to political) for why gains in value from your own labour are taxed at higher rates than that from the labour of others (dividends) or the value from use of inanimate objects (capital).
I do think the current situation where a tax advantaged product, evolved to fund retirement, is the absolute best way to transfer large sums between generations is ludicrous and had to change 

Nebulous2

kempiejon said:

This preponderance of LLM ChatGPT, Grok et all output on the boards and the credence it seems to garner rather tragically answers a question I pose myself about actual intelligence.

Steel produced changed characteristics after the launch of atomic bombs in the 1940s and steel produced before that - often salvaged from sunk ships - is known as 'low background steel' and is valued for some applications. 

I've seen comparisons made with that fundamental change and the introduction of AI. People are seeking and storing copies of pre-AI human produced material, before the internet became contaminated by AI content. 

I'm no expert - but have read several articles recently giving that comparison and was quite fascinated by the comparison. 

I've been reluctant to use AI, but asked Gemini recently to produce an itinerary for a trip I was doing, including suggested accommodation, type of attractions we like and daily maximum mileage. 

It made a good attempt,  we used two sets of the suggested accommodation, and found some interesting attractions that we weren't aware of. I kind of wondered about a tie-in with advertisers on Google - if the suggestions were providers that were advertising with them. 

phlebas192

cockerWalker said:

A possibly unpopular opinion on a savings and investment forum, but a wealth tax would help a lot. I've never understood an economic basis (as opposed to political) for why gains in value from your own labour are taxed at higher rates than that from the labour of others (dividends) or the value from use of inanimate objects (capital).

The arguments against this are that dividends are paid from profits that have already been taxed whilst capital gains includes not just real gain but also increases in value that are just down to inflation.

For every £1 of pre-tax profit that a company pays as a dividend, HMRC takes 25p in corporation tax and the recipient is then taxed at 8.75% or 33.75% on the remaining 75p. That equates to a total tax take of 31.6% (basic rate) and 50.3% (higher rate) which is already higher than earned income.

Capital gains used to take into account inflation indexation (so you were only taxed on the real gain) but that could be somewhat complicated at a time when it wasn't easy to obtain inflation data and few had access to spreadsheets. As such, a lower overall rate without indexation did make sense and I don't remember anyone complaining when it was changed! Since it is now easy to obtain historic inflation data and HMRC could include the indexation calculation in their self assessment worksheet there is a good argument for increasing CGT rates to match earned income on real gains.