Abolition of the 10% Tax Band and reduction of Standard rate to 20% [Merged]

Billionpounddreamer · 30 November 2007 at 7:55PM

EdInvestor wrote: »

I think you'll find there are a lot of non-rich people who are now investing in property to provide a long term pension fund.They will be big beneficiaries. Did you think that all people who pay higher rate tax were rich?It kicks in at around 35k after all, that's only about a third more than the average wage.This measure will be very helpful in encouraging people to save and invest.

It might be worth checking your figures, the exemption is now 9,200.

Which people are these?Are you referring to people who have long term capital gains, accumulated because they didn't use their annual tax free allowance, which they were hoping to reduce instead by taper relief? This would be the only way that a cut from 40% to 18% could be presented as a rise from 10% to 18% (and you say I'm a victim of political propaganda!)

If they want to realise the gain under the old system they can do so now: the new simplified system with low rate will be much better for the vast majority.

Obviously you have different opinions to me then, as I would consider somebody who has enough money to purchase a second house well-off.

Higher rate tax kicks in nearer 40k than it does 35, after Personal Allownaces.

With regard to your capital gains point, I would like to point out that many people would benefit at lower rates other than 40%. Only higher rate taxpayers must pay at 40%, because, at present, the tax rates on capital gains are the same for savings.
First, you have the annual exemption (which you correctly said is at £9200), then it is charged at 10% for starting rate tax payers.
Then charged at 20% for basic rate, and last at 40% for higher rate taxpayers.
What about retirees who wish to sell property that isn't their primary property residence?
What about low earners? There are many people who could take advantage of the lower rates, but instead are being forced to pay 18% if new plans do come through, and Darling doesn't backtrack (which I am pleased to see that he is).
Then, as you correctly say, there is also the Taper relief which people can take advantage of (although it is to be abolished too), where only a certain percentage of the gain made beocmes subject to capital gains tax.

Also, the fact that most people don't have the knowledge to take advantage of the IHT doesn't mean that the "increase" that never actually happened is a good thing. That isn't even an arguement, because the way it was presented to the people who don't understand it, was that couples get a £300k increase in their IHT exemption, when this wasn't the case.

You say that the sytem proposed encourages investment and saving, but then you go on to say that anyone who wants to realise a gain that will be subject to less tax can do so now. Surely then, this means the new system penalises people who make such investments?

The new tax system may be simplified, but the taxman isn't going to make changes unless it results in more money for HMRC.
Take for example new plans to change the capital allowances system. Under such plans, assets in the general pool will only receive 20% xapital allowances, as opposed to the current 25%.
FYA are to be abolished for SME's, and as assets such as expensive motor cars will, in the future, be included in the general pool, there will be no balancing allowance upon disposal. Does this sound like a government who supports entrepreneurship?

tghe-retford · 4 December 2007 at 10:33AM

I am going to be hit very hard next April. I will be £161 a month out of pocket which leaves me with £30 to spend on food, travel to work and other utilities, and even then, inflation busting price increases in the essentials mean that the £30 will be swallowed up and I will have nothing left to live on.

In fact, I will be much better off being on the dole.

And around here, either the jobs are minimum wage where I will be in the same position or the better paid jobs need "experience in the field" or "university degree(s)".

I can't afford to keep the house nor could I move in with someone else. I am literary on my own in this.

I fear for those who have no idea (including those who I work for, regardless of me warning them) of the significant amount of money that they plan to lose when this comes in.

Are there any tax calculators which have the latest personal allowances which have been published by HM Treasuary in October, so I can get a better idea of what the damage will be come April? And is there any way that we can warn low earners of what is going to happen to their pay come April so they can take action before they end up in serious trouble or even homeless?

flashnazia · 4 December 2007 at 11:19AM

From April 08,

Personal allowance, £5435 (a poxy £210 increase). Anything above taxed at 20%.
NI, Earnings over £105 (increased by £5) per week at 11%.

CSL_2 · 5 December 2007 at 11:32PM

As I mentioned in my post of 21st November, this is the sort of topic that BBC 2 Working Lunch Programme like to follow up.

For best results, then an email to their producer Tracey Hobbs might prove very worthwile.

who knows, they might make a 10 minute slot for it.........

CSL
Wednesday 5th December 2007