If RR is putting up income tax later this month, would it be wise to extract taxable pension?

DRS1

Secret2ndAccount said:

NorthYorkie said:

The income tax rate is fixed for a complete tax year so any increase will only apply from 6 April next year.

The income tax rate is fixed forever, by the Finance Act... Until they enact a fresh Finance Act... Which they do every year, after the Budget. And it frequently applies the various tax changes retrospectively, backdated to April 6th or to the date of the budget.

Zagfles said:

It would also be ridiculously complicated to have 2 income tax rates in one tax year. 

For PAYE employees it would only be slightly ridiculously complicated to implement. It would mean a software update, but the math isn't hard. No worse than implementing different rates for Scotland, or stopping charging someone NI after they hit SPA.
Self employed people already had to file two sets of accounts for one year, last year. Google 'Basis Period Reform' for those who aren't in the know. Which I suppose was ridiculously complicated, but they still did it. Most of those people will be switching to monthly reporting soon anyway, or already have.

For the record, I too think the change will occur from next April 6th. I'm sure some people who can will bring forward bonuses, or delay expenses to gain the extra 2%.  I haven't started drawing from my SIPP yet, but I'm thinking about cashing in a small pot or two before April 5th - perhaps the motivation I need to start buying equities in my GIA again.

Maybe it is a myth but I thought income tax was a temporary tax (since the Napoleonic wars) and that you needed a Finance Act each year to IMPOSE income tax for the next year.

As for monthly reporting I thought it was going to be quarterly (for income tax).  That is painful enough thank you.

Aretnap

Aretnap said:

Cobbler_tone said:

zagfles said:

Cobbler_tone said:

Treasury ‘insiders’ suggest the raid on the TFLS has been shelved. The 2p up/2p down seems a consistent theme, unless you pay 40% tax and NI will still apply.
Lead article from the Telegraph. Doctors and Teachers not happy. 
If that transpires I could consider a bigger TFLS but would wait for the brains to crunch the numbers. Probably hold fire to see what the subsequent chancellor reverses.

I imagine that would be combined with a reintroduction of a pensioners' tax allowance so they can avoid accusations of hitting low income pensioners. It would of course still hit higher income pensioners and those drawing pensions under state pension age.  

I guess I am fortunate to have not pressed the button on early retirement yet. Planning to go at 57 next Autumn but enough time to review the changes and maybe do a few more months. My plan is currently robust from 57-67.

I hope it doesn’t scupper too many who have already ‘pushed the button’, or those of course who are already genuinely struggling.
It’s the press (who not just with the budget) revel in attempting to whip everyone into a frenzy. Hard to believe that there was a time when news coverage was based on reporting facts.

On a back of an envelope calculation, a 1-2% rise in income tax would force me to take drastic action to protect my boringly middle-class retirement plans, such as working for an extra 3 months, taking a low stress part time job for a year or so after I quit my high stress full time one, or taking maybe one less holiday every couple of years. Or most likely, a bit of all three.

Actually, on reflection, if a tax rise meant that I could count on getting my knees replaced on the NHS before I become completely immobile, rather than having to set aside money to get them done privately, it could even be broadly financially neutral for me. 

Though I probably shouldn't get too far ahead of myself on that point: it sounds like we're talking about the amount of tax that's needed to stop public services degrading further, rather than the amount needed to restore them to where they were in 2010.

Still the broader point is that tax is an allocation of resource, not a destruction of it. Keeping tax low by not maintaining the roads just means that we all have to pay more to repair our cars whenever we hit a pothole. Keeping them low by not investing in the NHS means we have to spend more on private healthcare, or go without. Avoiding a tax increase by scrapping the triple lock probably wouldn't be too popular with certain sectors of society either... etc etc.

GunJack

Aretnap said:

Actually, on reflection, if a tax rise meant that I could count on getting my knees replaced on the NHS before I become completely immobile, rather than having to set aside money to get them done privately, it could even be broadly financially neutral for me. 

Just had my second one done...NHS all the way, it would take many, many years of an extra 2pct to equate to the 8-10k youd have to fork out for each one done privately...

Secret2ndAccount

DRS1 said:

Secret2ndAccount said:

NorthYorkie said:

The income tax rate is fixed for a complete tax year so any increase will only apply from 6 April next year.

The income tax rate is fixed forever, by the Finance Act... Until they enact a fresh Finance Act... Which they do every year, after the Budget. And it frequently applies the various tax changes retrospectively, backdated to April 6th or to the date of the budget.

Zagfles said:

It would also be ridiculously complicated to have 2 income tax rates in one tax year. 

For PAYE employees it would only be slightly ridiculously complicated to implement. It would mean a software update, but the math isn't hard. No worse than implementing different rates for Scotland, or stopping charging someone NI after they hit SPA.
Self employed people already had to file two sets of accounts for one year, last year. Google 'Basis Period Reform' for those who aren't in the know. Which I suppose was ridiculously complicated, but they still did it. Most of those people will be switching to monthly reporting soon anyway, or already have.

For the record, I too think the change will occur from next April 6th. I'm sure some people who can will bring forward bonuses, or delay expenses to gain the extra 2%.  I haven't started drawing from my SIPP yet, but I'm thinking about cashing in a small pot or two before April 5th - perhaps the motivation I need to start buying equities in my GIA again.

Maybe it is a myth but I thought income tax was a temporary tax (since the Napoleonic wars) and that you needed a Finance Act each year to IMPOSE income tax for the next year.

As for monthly reporting I thought it was going to be quarterly (for income tax).  That is painful enough thank you.

I think the Napoleonic one was temporary. Then they brought it back - again temporarily - but it's at 180 yrs and counting. I don't think you can be right about the finance act expiring, because it sometimes runs more than 12 months from one act to the next (not always enacted on the exact same date after the budget)
Sorry, you are right about the quarterly reporting, not monthly.

DRS1

Secret2ndAccount said:

DRS1 said:

Secret2ndAccount said:

NorthYorkie said:

The income tax rate is fixed for a complete tax year so any increase will only apply from 6 April next year.

The income tax rate is fixed forever, by the Finance Act... Until they enact a fresh Finance Act... Which they do every year, after the Budget. And it frequently applies the various tax changes retrospectively, backdated to April 6th or to the date of the budget.

Zagfles said:

It would also be ridiculously complicated to have 2 income tax rates in one tax year. 

For PAYE employees it would only be slightly ridiculously complicated to implement. It would mean a software update, but the math isn't hard. No worse than implementing different rates for Scotland, or stopping charging someone NI after they hit SPA.
Self employed people already had to file two sets of accounts for one year, last year. Google 'Basis Period Reform' for those who aren't in the know. Which I suppose was ridiculously complicated, but they still did it. Most of those people will be switching to monthly reporting soon anyway, or already have.

For the record, I too think the change will occur from next April 6th. I'm sure some people who can will bring forward bonuses, or delay expenses to gain the extra 2%.  I haven't started drawing from my SIPP yet, but I'm thinking about cashing in a small pot or two before April 5th - perhaps the motivation I need to start buying equities in my GIA again.

Maybe it is a myth but I thought income tax was a temporary tax (since the Napoleonic wars) and that you needed a Finance Act each year to IMPOSE income tax for the next year.

As for monthly reporting I thought it was going to be quarterly (for income tax).  That is painful enough thank you.

I think the Napoleonic one was temporary. Then they brought it back - again temporarily - but it's at 180 yrs and counting. I don't think you can be right about the finance act expiring, because it sometimes runs more than 12 months from one act to the next (not always enacted on the exact same date after the budget)
Sorry, you are right about the quarterly reporting, not monthly.

And of course they have changed the time of year for the budget (I remember it being in the spring) so I must be imagining things.

ETA I had a look and found section 4(1) of the Income Tax Act 2007
Income Tax Act 2007
which says
"Income tax is charged for a year only if an Act so provides."
Curious.

Qyburn

DRS1 said:

ETA I had a look and found section 4(1) of the Income Tax Act 2007
Income Tax Act 2007
which says
"Income tax is charged for a year only if an Act so provides."
Curious.

I guess that still allows for an open ended act, one setting income tax for every year from now on, unless repealed or superceded. 

Cobbler_tone

Who knew the MSE Forum would end up on Napoleon. We'll be reaching Godwin's soon!

artyboy

Cobbler_tone said:

Who knew the MSE Forum would end up on Napoleon. We'll be reaching Godwin's soon!

I think Murphy's is the Law of choice in these parts.

zagfles

Secret2ndAccount said:

NorthYorkie said:

The income tax rate is fixed for a complete tax year so any increase will only apply from 6 April next year.

The income tax rate is fixed forever, by the Finance Act... Until they enact a fresh Finance Act... Which they do every year, after the Budget. And it frequently applies the various tax changes retrospectively, backdated to April 6th or to the date of the budget.

Zagfles said:

It would also be ridiculously complicated to have 2 income tax rates in one tax year. 

For PAYE employees it would only be slightly ridiculously complicated to implement. It would mean a software update, but the math isn't hard. No worse than implementing different rates for Scotland, or stopping charging someone NI after they hit SPA.
Self employed people already had to file two sets of accounts for one year, last year. Google 'Basis Period Reform' for those who aren't in the know. Which I suppose was ridiculously complicated, but they still did it. Most of those people will be switching to monthly reporting soon anyway, or already have.

For the record, I too think the change will occur from next April 6th. I'm sure some people who can will bring forward bonuses, or delay expenses to gain the extra 2%.  I haven't started drawing from my SIPP yet, but I'm thinking about cashing in a small pot or two before April 5th - perhaps the motivation I need to start buying equities in my GIA again.

How would a normal cumulative tax code work? Particularly for those with variable income eg bonuses/overtime etc.

HMRC aren't even capable of updating the PAYE system to deal with interest properly, since the 2016 changes to pay interest gross, and that's a pretty simple change they've had 9 years to do, so they've got no chance whatsoever of doing a much more complicated update to cope with tax rates changing half way through the tax year, with the whole PAYE system being structured around YTD income rather than pay period income. 

bjorn_toby_wilde

Aretnap said:

Aretnap said:

Cobbler_tone said:

zagfles said:

Cobbler_tone said:

Treasury ‘insiders’ suggest the raid on the TFLS has been shelved. The 2p up/2p down seems a consistent theme, unless you pay 40% tax and NI will still apply.
Lead article from the Telegraph. Doctors and Teachers not happy. 
If that transpires I could consider a bigger TFLS but would wait for the brains to crunch the numbers. Probably hold fire to see what the subsequent chancellor reverses.

I imagine that would be combined with a reintroduction of a pensioners' tax allowance so they can avoid accusations of hitting low income pensioners. It would of course still hit higher income pensioners and those drawing pensions under state pension age.  

I guess I am fortunate to have not pressed the button on early retirement yet. Planning to go at 57 next Autumn but enough time to review the changes and maybe do a few more months. My plan is currently robust from 57-67.

I hope it doesn’t scupper too many who have already ‘pushed the button’, or those of course who are already genuinely struggling.
It’s the press (who not just with the budget) revel in attempting to whip everyone into a frenzy. Hard to believe that there was a time when news coverage was based on reporting facts.

On a back of an envelope calculation, a 1-2% rise in income tax would force me to take drastic action to protect my boringly middle-class retirement plans, such as working for an extra 3 months, taking a low stress part time job for a year or so after I quit my high stress full time one, or taking maybe one less holiday every couple of years. Or most likely, a bit of all three.

Actually, on reflection, if a tax rise meant that I could count on getting my knees replaced on the NHS before I become completely immobile, rather than having to set aside money to get them done privately, it could even be broadly financially neutral for me. 

Though I probably shouldn't get too far ahead of myself on that point: it sounds like we're talking about the amount of tax that's needed to stop public services degrading further, rather than the amount needed to restore them to where they were in 2010.

Still the broader point is that tax is an allocation of resource, not a destruction of it. Keeping tax low by not maintaining the roads just means that we all have to pay more to repair our cars whenever we hit a pothole. Keeping them low by not investing in the NHS means we have to spend more on private healthcare, or go without. Avoiding a tax increase by scrapping the triple lock probably wouldn't be too popular with certain sectors of society either... etc etc.

Always assuming that there is a correlation between paying more tax and receiving better services. Doesn’t seem to have been so for quite a long time.