Is this article on the BBC website correct?

Innys

Please see the second to last paragraph in this article:

http://news.bbc.co.uk/1/hi/business/7209266.stm

Is this correct? Surely, for a higher rate tax payer, the reduction in the rate of basic rate tax is immaterial as they will still get relief at 40%? I am assuming that any contributions made will be from earnings within the 40% band.

Thanks very much

dunstonh

Higher rate tax is not changing so relief will correctly remain at 40%.

Paul_Herring

The paragraph in question:

The_BBC wrote:

In any event, we will all lose out from 6 April 2008, because on that date the basic rate of income tax will drop from 22% to 20%, and that means that we will all receive a little less tax relief on our pension contributions.

(Emphasis mine)

dunstonh wrote: »

Higher rate tax is not changing so relief will correctly remain at 40%.

The article is still inaccurate (depending on your view point of course.)

Higher rate tax payers won't be losing out since instead of 18% rebate they'll be getting a 20% rebate - i.e. they'll be getting more cash, not less.

More hyperbole from the BBC.

Footsie_2

Agreed, more fluff from the BBC. Wouldn't pay any attention to it. The new scheme is due for release 2012 so it will change ten fold between now and then before being delayed for a year and rushed out within six months as is the way with new schemes.

dunstonh

The article is still inaccurate (depending on your view point of course.)

I didnt read the article

As soon as I saw it was sourced from Hargreaves Lansdown I couldnt be bothered. I just considered it to be another advert for them in the guise of a BBC news report.

The last article they did was so full of flaws I was surprised they could get away with it.

Retired_I.F.A.

Lol Tom was my Widows life Inspector at one time. Head of research there now he is. Should be head of publicity I reckon, his mug is in the press enough.

Milarky

Paul_Herring wrote: »

Higher rate tax payers won't be losing out since instead of 18% rebate they'll be getting a 20% rebate - i.e. they'll be getting more cash, not less.

I don't think so if I understand correctly - because a higher rate payer contributes £78 (from net pay) this year and gets £100 benefit. They then claim back the £18 to bring the net cost to them down to £60.

Next year, they must pay £80 to secure a benefit value of £100 and then report that and claim back £20. So the net cost is again £60.

Brum_Man

Milarky wrote: »

I don't think so if I understand correctly

I'm not completely sure, but what I think he meant was 'cash' in the sense that 40% tax payers will now, using your example, get £20 in their pocket instead of what used to be £18 through self assessment.

So £2 less will be going in to the pension fund and instead going to the individual via their tax code as they are now claiming 20% back instead of 18%, so they end up with more in their pocket now but less in the fund for retirement.

Paul_Herring

Milarky wrote: »

I don't think so if I understand correctly - because a higher rate payer contributes £78 (from net pay) this year and gets £100 benefit. They then claim back the £18 to bring the net cost to them down to £60.

Next year, they must pay £80 to secure a benefit value of £100 and then report that and claim back £20. So the net cost is again £60.

Hmm - probably. I forgot they'd be paying 'more' upfront.

Still, the BBC's [strike]advert[/strike] article is still wrong. The 40%ers won't be worse off.