Tax Free Lump Sum and 2025 Budget

LHW99

The trouble is that "wealth" begins to mean accumulated wealth as much as / more than actual earnings.

It is quite possible to build up well over £1m in assets by later life even if never a higher rate tax-payer, by a combination of living a modest lifestyle, saving regularly and owning a house that has increased in value.

Should that person be taxed more or less than someone who has an income in the £45k bracket who either lives paycheck to paycheck, or is young, still building savings and renting (or both)?

I don't know the right answer (if there is one), but it is another aspect of how complicated planning for a "wealth tax" on individuals would be.

snowlaser

Cobbler_tone said:

snowlaser said:

Secondly random people on an internet forum guessing what the government WILL do is totally speculation.  Use it at your peril.

Thirdly, if I had to guess 

  irony at its finest! 

It was deliberate irony ... clearly passed over your head.

The point is that whilst I'm prepared to speculate, I think posters should take speculation - mine included - with a large pinch of salt.

Cobbler_tone

snowlaser said:

Cobbler_tone said:

snowlaser said:

Secondly random people on an internet forum guessing what the government WILL do is totally speculation.  Use it at your peril.

Thirdly, if I had to guess 

  irony at its finest! 

 I think posters should take speculation - mine included - with a large pinch of salt.

I do. I haven’t read any speculation that would positively/negatively impact me TBH.

ukdw

Interesting podcast where Tom McPhail (who usually seems to make sense about pensions when I have seen him on shows in the past) goes into a bit of detail of his (with the help of his IFA) decision to take his full £268k PCLS this time - mentions a few potential upsides or downsides - depending on what actually ends up happening in the budget.

https://youtu.be/qyeuon-qxr4?si=RPbEnfu7CtIvDwhH

Cobbler_tone

ukdw said:

Interesting podcast where Tom McPhail (who always seems to talked sense about pensions when I have seen him on shows in the past) goes into a bit of detail of his (with the help of his IFA's decision) to take his full £268k PCLS this time - mentions a few potential upsides or downsides - depending on what actually ends up happening in the budget.

https://youtu.be/qyeuon-qxr4?si=RPbEnfu7CtIvDwhH

I would have thought it is relative common sense if you've crossed the limits and there is a potential the limit might be cut. Either way, it is extremely low risk to take it in that position.

In a nutshell here and clearly opens with not suggesting everyone follows suit:

https://henrytapper.com/2025/10/03/im-a-pensions-expert-and-im-taking-my-tax-free-cash-now-tom-mcphail/

roadweary

It was actually the written version of this discussion that Apple News pushed at me that alarmed me into my initial post....

MetaPhysical

I like Tom but even as he says himself on that podcast, he could be wrong.

MetaPhysical

snowlaser said:

Firstly the government CAN do pretty much anything it likes.  They could turn up tomorrow with a compulsory purchase order to buy your house, they could abolish the entire pensions system, they can declare war on Russia ... they can do whatever they want.

They can't.  They have to get their policy through the House of Commons and extreme examples like you cite would not be rationally voted for.  However, as to your broader point, yes I agree.  A government with a willing majority can do whatsoever it likes.  However, the current constituency of the Parliamentary Labour party is a loose coalition of factions of left, right and centre and do not always agree - just look at the defeat of the government's bill on cutting benefits in June.  Most Labour MP's as part of their red wall landslide aren't there in their HoC seats because they "won" the political argument at the last election - they won because anyone would have won other than the Tories.  

So don't think that whatever is in the budget will automatically get through the HoC.  I don't intend to be political but sometimes politics and economics are so closely intertwined it's impossible not to be political in a post contribution, especially when pertaining to the budget, the government's set piece financial event.

MetaPhysical

michaels said:

If I were to take the tfls and potentially it then be unwrapped I might use the money for my index linked gilts ladder. These obviously pay a coupon plus the inflation adjustment on maturity.

Does anyone know how these are taxed?  Do the coupons count as interest income and the difference between purchase price and value at maturity count as a capital gain?

I am looking to do exactly the same.  Low coupon, short to mid term gilts with the "profit" coming upon gilt maturity and the lack of CGT at that event.  The issue is that such gilts are not paying much, 3-4%-ish.  Also there is a lot of admin working out the tax position with the coupons from what I can see if they are in your GIA.

RogerPensionGuy

MetaPhysical said:

michaels said:

If I were to take the tfls and potentially it then be unwrapped I might use the money for my index linked gilts ladder. These obviously pay a coupon plus the inflation adjustment on maturity.

Does anyone know how these are taxed?  Do the coupons count as interest income and the difference between purchase price and value at maturity count as a capital gain?

I am looking to do exactly the same.  Low coupon, short to mid term gilts with the "profit" coming upon gilt maturity and the lack of CGT at that event.  The issue is that such gilts are not paying much, 3-4%-ish.  Also there is a lot of admin working out the tax position with the coupons from what I can see if they are in your GIA.

Reference gilts, my view is a bit different and not at all complicated. 

Any coupon is just interest I think, so up to 10K PA no paperwork required, it's automatically sorted IIRC. 

And another option possible is just sell gilts before coupon and a few days later buy more gilts so I guess its possible to never actually any coupon interest or CGT.

However many people getting low coupons of say 0.125 or 0.25% isn't much to deal with and avoid costs in selling/buying, possibly price shifts as well. 

These gilts certainly look effective for 40 & 45% income tax payers in my opinion.