Tax Free Lump Sum and 2025 Budget

roadweary

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

Marcon

roadweary said:

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

They could.

roadweary

Marcon said:

roadweary said:

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

They could.

!!!!!!    (v impressive redaction of a gentle expletive )

MyRealNameToo

roadweary said:

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Parliament makes the laws so in principle they can do anything they want. Sometimes they dont change enough laws and thats where conflicting legislation ends up in court. 

Law can be applied retrospectively even, its not common and its a headache for enforcement but in both 2004 and 2008 budgets were passed that contained legislation that made certain tax avoidance schemes that utilised loopholes retrospectively illegal and went after those that had avoided taxes using the former loopholes historically. 

In practice its rare for it to be announced that it would be retrospectively applied however some budgets do contain announcements that take immediate effect but each year a Finance Act (or more than one) is passed that converts the budget into law and some of those may be slightly retrospective given its normally passed some time after the announcement was made so technically backdated a few weeks/months. 

Generally bad news stories are given with advanced warning to give companies time to adjust systems etc other than when its closing loopholes that were never intended to exist in the first place. 

Isthisforreal99

roadweary said:

Marcon said:

roadweary said:

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

They could.

!!!!!!    (v impressive redaction of a gentle expletive )

Much like the reaction to most on this forum at this question being asked for the umteenth time.

Albermarle

roadweary said:

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

If you read through the forum, you will see many threads based on speculation about the TFLS.

The chance of it being removed completely is less than zero.
The chance of it being any other % than 25 is less than zero.
The chance of the maximum amount you can take being reduced from £268K is unlikely but possible.

As it is all speculation, and the Govt has actually said absolutely nothing about it, then further speculation on how it might be implemented in the unlikely event it happened, seems a bit pointless 

BridgetTheCat

Oh !!!!!! not again 🙄

JoeCrystal

The right for HMRC to collect taxes are always retrospectively. I remember reading one article saying that if the Government ever failed to pass budget regarding the income taxes which is still temporary, they will have to refund all the incomes taxes already collected during the year, not sure how true that is!

Cobbler_tone

Albermarle said:

roadweary said:

Hi,

Imagine the government does remove or reduce the TFLS at the budget, how would this be implemented does anyone know?

Could they announce it as effective immediately?  Or would that breach any rules or norms about allowing people approaching or of pension age having time to get their finances in order?

Thanks,
R

The chance of it being removed completely is less than zero.
The chance of it being any other % than 25 is less than zero.

Are you 1000% sure about that?

HedgehogRulez

I’m 110% sure this has never been discussed before…

Moonwolf

This has been repeatedly floated before each budget. The justification is that it raises taxes and closes a loophole that you can save cash tax free and get 25% back tax free.

Although it has been repeatedly raised it hasn’t happened.

Firstly it would take a lot of time for most of the tax benefits to appear, so in the current situation is isn’t going to give the current government a lot of extra revenue this parliament. No idea how many people are retiring this year, but assuming most would leave the money in place for drawdown, or add it to an annuity the tax won’t be received until it flows into income. Tax doesn’t suddenly get paid because people can no longer take it out of the pension tax free.

This delay is particularly true if the government honours promises not to hit people with major changes within 10 years of retirement, it may be that someone argues this doesn’t count but many people will come forward with “plans” they had to pay off important things with the money. Note, no government has to abide by that agreement.

It would be unpopular amongst the right wing press and middle classes and generate a lot of noise and stories of hardship.

If it applied to only DC pots it would be seen as unfair, applying it to DB schemes as well and a lot of NHS staff and unions would add to the noise. “Nurse Jones has to retire a little early because of cancer after a lifetime of service and no longer gets the lump sum she needs to pay off the mortgage and ease her housing worries.”

This isn’t an open ended commitment, as it stands, fiscal drag will eat away at the benefit over time anyway.

So why would a government bring something in that would be unpopular, probably generate a lot more noise in the press than it deserves in proportion to the people it really hurts and doesn’t bring in a lot of extra tax in the near future.

I would be surprised, although I have been surprised before and I’m certainly not a tax expert or economist.