Tax Free Lump Sum and 2025 Budget

MetaPhysical

I agree, if you're a 40% tax payer then to get the 3.7 to 4% (and above) capital yield on the gilt you'd have to earn about 6.2 % on a MM fund which is not going to happen.  If you have to hold investments in a GIA outside of an ISA or SIPP wrapper then they seem a no brainer if you pay tax at 40% and above.

A question I have is that even though the gilt is capitals gains tax free, does the gain still get added to your income for income tax purposes as well?  I appreciate the coupon contributes to income tax.

Cobbler_tone

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

kinger101

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

michaels

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

michaels

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.

SO I need to build a 'linkers' ladder to cover the period before state pension cuts in.  I was going to hold this in my sipp but am now thinking it wold be a good use of my TFLS taken early to de-risk.  However I may tweak the ladder as there is one bond (2030?) that pays 3%+ rather than the 0.x% that all the others pay so it may be best to just accept there is a gap in the ladder at this point to avoid the larger coupons.

Silvertabby

kinger101 said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Re, personal allowance, one issue they have with freezing it is that for 25/26 it will only just cover the new state pension.  Which means unless they want to create a compliance headache, they may actually have to start increasing the PA earlier than planned rather than extending it.  Which also means the triple lock could effectively decide what the allowance is each year.

Probably easier to copy the Tory pre-election pledge.  ie, increase the personal allowance for those over SPA, so it always exceeds the new single tier pension.

That said, the majority of State pensioners already pay income tax due to SERPS/occupational pension/both.

Cobbler_tone

michaels said:

Cobbler_tone said:

There are a few more ‘sensible’ articles around as the budget approaches. A few things stand out and have been getting airtime.
Gambling tax, a levy on pension funds (e.g. 0.25% collected from the provider) and pushing out the freeze on the tax bands to 2030. I can see them scrapping stamp duty on cheaper properties to help first time buyers and try to get the housing market moving. Counter acted by a ‘mansion tax’. 

Not long to wait now and hopefully nothing to scupper anyone’s immediate plans.

Can you say more about this levy on pensions - is it one off confiscation of a fraction of everyone's pension pot or an annual take?  How will it apply to DB pensions?

This article of guesswork.

https://www.bdo.co.uk/en-gb/microsites/budget-autumn-budget-2025/predictions

SnowMan

RogerPensionGuy said:

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.

When you buy a gilt, part of the purchase price is accrued interest to the date of purchase and if you sell it before the next coupon then part of the sale price is accrued interest to the date of sale. If held ouside of an ISA or SIPP you are then taxed as interest income on the accrued interest on sale less the accrued interest on purchase, or roughly speaking the accrued interest between purchase and sale. 

So you are roughly speaking being taxed on 1/365th of the annual coupon per day you hold the gilt. 

Cobbler_tone

As for state pensions falling into taxable territory. Maybe that mitigates the triple lock a bit eventually. Either that or it’ll be a two tier system for those at SPA. Not forgetting many already pay tax on their state pension who opted out.

Silvertabby

Cobbler_tone said:

As for state pensions falling into taxable territory. Maybe that mitigates the triple lock a bit eventually. Either that or it’ll be a two tier system for those at SPA. Not forgetting many already pay tax on their state pension who opted out.

Out of (round figures) 13 million UK State pensioners, 9 million already pay tax.