The inevitable pre-budget speculation on pensions

Grumpy_chap

michaels said:

it is getting close to the point where for a basic rate taxpayer is better off taking the income and saving in an ISA than saving in a pension - is that really where the govt wants to be going?

The cynic in me might suggest that is exactly where the Government wants to be going but can't / won't say so. 
Money saved in a pension is not considered as capital for means-tested state benefits whereas money in an ISA is.
Additionally, new money introduced into a pension can reduce income in the assessment period whereas new money introduced into an ISA does not.
This could be a very subtle way to reduce the future benefits payments without anyone actually noticing that a sleight-of-hand has been played.

aroominyork

There's plenty of evidence that legalising and regulating the sale of marijuana would generate lots of revenue (and reduce crime). That's another story, however. 

kinger101

DRS1 said:

RogerPensionGuy said:

One article I read said for every 1% extra applied to the 20% income tax produces 8 billion pounds and every 1% extra applied to 40% produces just 2 billion pounds.

If the black hole needs filling and a sensible fiscal headroom is to be achieved, it will need realistically an income tax rise and many smaller levers to be pulled. 

If unpopular choices are not made and inacted now, the next few budgets will become even more problematic for any government. 

My spare room is now fully stocked up with coke and popcorn for the event. 

I remember the days when people used to stock up on alcohol and cigarettes before a Budget in case the excise duty went up.

But now you come to mention it taxing cocaine and other drugs could be a money spinner (not sure about popcorn though).

For those who can't see the idiotic grin on my face that was a JOKE.

Technically, the profits are taxable but VAT can only be levied on legally supplied goods and services.

michaels

OldScientist said:

michaels said:

A lot of us paid NI on the money that went into our pension so paying it again on drawdown (even if it is renamed Income tax) means I have paid the same twice tax on the delayed income. 

And with the only win from a pension over an ISA being the TLFS saving 5% tax on the way out it is getting close to the point where for a basic rate taxpayer is better off taking the income and saving in an ISA than saving in a pension - is that really where the govt wants to be going?

You're definitely not paying tax twice on the capital gains.

Except for the employer's contribution.

But you wouldn't be paying tax on capital gains in an ISA either, and the money in an ISA has only suffered a single round of NI.

Grumpy_chap

michaels said:

OldScientist said:

michaels said:

A lot of us paid NI on the money that went into our pension so paying it again on drawdown (even if it is renamed Income tax) means I have paid the same twice tax on the delayed income. 

And with the only win from a pension over an ISA being the TLFS saving 5% tax on the way out it is getting close to the point where for a basic rate taxpayer is better off taking the income and saving in an ISA than saving in a pension - is that really where the govt wants to be going?

You're definitely not paying tax twice on the capital gains.

Except for the employer's contribution.

But you wouldn't be paying tax on capital gains in an ISA either, and the money in an ISA has only suffered a single round of NI.

Have I missed something?

A 2 percent increase in Income Tax (as has been suggested in some media) will gain loads of negative press and be a storm that the Government have to weather.

Combining that with a 2% cut in employee's NI will simply reduce the amount of additional tax gained, but will not reduce the negative press.
Nor would cutting employee's NI reduce the costs of employer's NI, so nothing to overcome that negative press continuing.
Plus, the cut in employer's NI with the increase in Income Tax will also be jumped on by the press as hammering the pensioners.

The Government might just as well add the 2% to Income Tax, bear the outrage that will follow, and forget about the changes to NI.

Cobbler_tone

There are easier ways to claw the winter fuel allowance back. 

NoMore

The point of the 2% increase in income tax and 2% decrease in ni is that for most people it will make little (none?)difference to their take home but people who pay income tax and little to no ni it will make a difference. Pension income being a big one. Landlords are cited in the press as well but not being a landlord I’m not sure of their tax situation. It’s likely they will argue that they have kept their manifesto promise by saying there’s no overall extra tax on ‘working people’ by doing this. 

DRS1

NoMore said:

The point of the 2% increase in income tax and 2% decrease in ni is that for most people it will make little (none?)difference to their take home but people who pay income tax and little to no ni it will make a difference. Pension income being a big one. Landlords are cited in the press as well but not being a landlord I’m not sure of their tax situation. It’s likely they will argue that they have kept their manifesto promise by saying there’s no overall extra tax on ‘working people’ by doing this. 

I doubt landlords will get much sympathy.

But what about working people who have income from savings outside an ISA?  That income does not attract NICs at the moment but it will get caught by an extra 2% on IT.

Would an adjustment to the PSA cover that?

michaels

Also working people over retirement age....

NoMore

DRS1 said:

NoMore said:

The point of the 2% increase in income tax and 2% decrease in ni is that for most people it will make little (none?)difference to their take home but people who pay income tax and little to no ni it will make a difference. Pension income being a big one. Landlords are cited in the press as well but not being a landlord I’m not sure of their tax situation. It’s likely they will argue that they have kept their manifesto promise by saying there’s no overall extra tax on ‘working people’ by doing this. 

I doubt landlords will get much sympathy.

But what about working people who have income from savings outside an ISA?  That income does not attract NICs at the moment but it will get caught by an extra 2% on IT.

Would an adjustment to the PSA cover that?

At the end of the day it’s to try and raise revenue so of course some people are going to pay more. They are just trying to make it politically palatable. Whether it will work in that way I have no idea.