Any views on Tax Personal Allowance from April 2031?

RogerPensionGuy

A general question for any views on how the tax personal allowance will move, change, morf or be treated from April 2031?

As I understand it the personal allowance has been been frozen since April 2021, them got an extension and currently it may unfreeze April 2031, that's an amazing 10 years.

Reason I'm so keen for any views is income augmentation planning.

I was out with a few like minded people the other day, most are trying to stay below 40% / 50K income to maximise net income.

A few are lucky enough to be fearful of the 60% Tax /100K income zone.

People are trying to sort of set gross income to them 50K & 100K or just below.

We all have pensions and annuities that roll up with RPI or a fixed % every year.

A few of us are very keen to do another annuity any day soon as rates are highish currently.

Altho we mostly like RPI, fixed or flat indexes are all on the table.

Our views are if people do RPI annuities and we see hot years of inflation in these next 5 years, people will move in to the 40% & 60% tax zones and probably get stuck in these zones.

However doing say a 1%, 2% or flat annuity may help avoiding them 40% or 60% tax zones, plus by doing say a flat annuity this will allow a bigger initial income now in the gogo years and help just stay under them 40% and 60% barriers.

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We are aware nobody can predict inflation, we collectively guessed 3% on average.

Now back to question for any views on the personal allowance from April 2031.

Some of us feel it will get another freeze extension, some feel it will get unlocked but only increase at maybe 50% or 70% of inflation, so effectively half unlocked in our heads.

I'm aware there's no crystal balls, but any views, comments or suggestions most welcome.

TIA Roger.

QrizB

I'll just note that we're due a general election before 2031. What happens with the Personal Allowance (and the tax bands, and lots of other things) could depend on the results.

JoeCrystal

Difficult to say, arguably, it seems most likely thing is to get rid of that £100,000 tax traps I feel. Or at least make it marginal tax percentage increase logically across the whole brackets.

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82134156#Comment_82134156

I think that's unlikely, they'll probably make matters worse. For instance they need to sort the issue of people only on the state pension being taxed, and probably the easiest way to do it is to reintroduce a pensioner's tax allowance. If it works like it used to, it was withdrawn once over a modest income, so there'll be another tax trap for pensioners.

I'm going off the idea of annuities for this reason, it might be better to able to finely control the pension income you take, for instance it could be better alternating your income between high and low if another such tax trap is introduced.

Dead_keen

If you look at the allowance in the 1990s to mid 2000's, it would have been under £10,000 in today's money.

I suspect it will go up as an election bribe by someone. I also see some tweaking going on to make sure that few people getting just the state pension will pay tax.

But I don't see us being well off enough for a significant increase in the personal allowance for all.

I think the huge disincentive at the £100,000 level, especially for those with childcare, should get changed. But the politics of the moment says to me it would be a courageous chancellor who did that.

MK62

Personally I suspect there might well be some kind of fudge to deal with the state pensioner tax issue.......possibly along similar lines to the Starter Rate for Savings....…ie an extra PA for over 67s, gradually withdrawn as income rises above the NSP level.

SVaz

It’s disgusting. Either needs to be £15k or £30k for a couple, however it’s split. Other countries manage to combine allowances.

A £30k allowance for a young family with one stay at home parent would be a massive help.

GunJack

It seems like another thread of well-off people moaning about tax....if the thresholds stay the same, deal with it and budget appropriately. Hell, if your gross income goes up £100 and you get £60 after tax, great you're still £60 better off....

Its not like the pensions weren't built up with tax relief in the first place....

michaels

I think the only certainty is that total tax take as a share of income will continue to go up (as it has done under both Tories and Labour), so perhaps bands will get unfrozen but tax will be lumped on elsewhere. Sadly for those of us with incomes that increase with inflation, our post tax incomes will fall in real terms, any protection will likely only apply to those earning the least.

Only mitigation is to make sure you are drawing as income the maximum to your current tax band threshold and gifting or sheltering elsewhere (ISA, low yield gilts) any you don't need to live on. (Or emigrate)

zagfles

https://forums.moneysavingexpert.com/discussion/comment/82134285#Comment_82134285

They do, and as a result tend to have higher tax rates, which makes the less numerate think we have low taxation. There's no chance that the "important principle" of independent taxation will be unwound, because that would mean higher tax rates, and headline income tax rates it appears are sacrosanct, no-one dares touch them.

RogerPensionGuy

Thanks for all the views.

My own view is we are in the longest period of personal allowance freezing in modern times and it doesn't appear to get much press at all and just blends in the background

I won't be surprised if it gets another 2 years on top making it 12 years and then somehow slug it from moving up.

I agree the 40% & 60% Tax Trap is a 1st world issue, however that 60% Tax Trap just looks very wrong and shows me UK tax can be a tad unfriendly or awkward for some.

I have no issues paying tax, however I wish to augment income flows to try achieving best net income so I can spend more, enjoy & help spin the economy up.

I will plan/treat the future of the personal allowance like I did the LTA, MPAA & the AA. I'll do a bit more thinking and guessing and pick my pathway.

A link below maybe of interest for some.

Cheers Roger.

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https://ifs.org.uk/articles/unfreezing-personal-allowance