Tax - incoming Labour govt

[88V8]

ie abolish the 25% tax free lump sum

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.

So.. no pension... your Plan B?

V8

[Lootman]

ie abolish the 25% tax free lump sum

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.

Perhaps but that is one tax break that I have never understood the rationale for.

[XFool]

ie abolish the 25% tax free lump sum

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.

Interesting. I still remember when the benefit of saving into a pension was... you got a pension.

[pje16]

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.

Interesting. I still remember when the benefit of saving into a pension was... you got a pension.

The real benefit is tax relief (obvs)

[XFool]

...It rather depends on whether you are talking about an entirely DIY pension, or a company pension - with employer contributions.

[pje16]

...It rather depends on whether you are talking about an entirely DIY pension, or a company pension - with employer contributions.

Company, with E'er conts and salary sacrifice

[Mike4]

I am not sure why property and pensions would be exempt from a wealth tax. I would expect it to apply to all wealth above a certain amount (5 million?).

But a wealth tax would have to be in Labour's manifesto so there would be time to prepare for it. Especially since it would be complicated to implement, given that individual net worth is not information that the government currently has or can easily collect. I suspect that a lot of wealth would "disappear" in the meantime.

I'm pretty sure I heard that nice Ms Rayner on the R4 wireless a year or so ago, saying Labour would deffly introduce a wealth tax after the next GE. She went on to reassure us listeneers that the majority of us wuz quite safe as the threshold would be set at £3m.

I wuzn't reassured.

[thebarns]

A wealth tax on pensions ?

I don’t see that happening - particularly as many will point out the true value of index linked final/career salaried defined benefit pensions schemes - very few of these exist in the private sector these days and most are in the public sector, Including all those in the civil service who are closely involved in the rules surrounding the valuation and taxation of these - these have been significantly in their favour for years.

Once they - due to the outcry - had to start calculating the proper value of these pensions, ie what would they cost you to buy on the open market were you to choose this option with a private pension pot, then many mid level defined benefit salaries would be valued at £500k - £1M, before taking into account private residences or more modest Isa savings.

I can certainly see Labour doing all sorts on CGT and levelling up unearned and earned income so there is no distinction on how they are taxed.

[AJC5001]

I'm pretty sure I heard that nice Ms Rayner on the R4 wireless a year or so ago, saying Labour would deffly introduce a wealth tax after the next GE. She went on to reassure us listeneers that the majority of us wuz quite safe as the threshold would be set at £3m.

I wuzn't reassured.

And what would the threshold be in 25 years time, I wonder?

Fiscal drag seems to be common ground for all political parties - look how long some of the IHT allowances have remained static, not forgetting the State Pensions Christmas Bonus of a magnificent £10!

Adrian

[AF62]

A wealth tax on pensions ?

I don’t see that happening - particularly as many will point out the true value of index linked final/career salaried defined benefit pensions schemes - very few of these exist in the private sector these days and most are in the public sector, Including all those in the civil service who are closely involved in the rules surrounding the valuation and taxation of these - these have been significantly in their favour for years.

Once they - due to the outcry - had to start calculating the proper value of these pensions, ie what would they cost you to buy on the open market were you to choose this option with a private pension pot, then many mid level defined benefit salaries would be valued at £500k - £1M

That also overlooks that DB pensions are taxed as income, and with civil service DB pensions you still have to pay UK tax on them even if you move overseas, plus they effectively vanish on the death of the pensioner or their spouse.

On what the Labour Party might do in relation to personal taxation, then the main impact is likely around Starmer’s statement at their most recent conference -

“We are looking at how we tax fairly. On wealth, I am looking at whether and how we tax all different forms of income. Some people obviously earn their income through a wage, other people earn it through stocks and shares and dividends and we are looking at what is a fair way to tax all income wherever it comes from.”

Told that it sounded like a ‘wealth tax’, he said: “No, it is not really a wealth tax. It is looking at different forms of income, it is stocks and shares and dividends.”

So it is obvious they are intending to do something, but what.

Whatever it is there will be a strong resistance from HMRC to significantly increase the number of people doing SA, particularly for relatively trivial amounts and all the hassle that brings. Also I can’t see Labour wanting to impact their voters who may hold small amounts of shares from employee share schemes.

ISAs - the simplest way for Labour to initially deal with those is to lower the £20k annual subscription limit. Sure it doesn’t deal with money in them but they get to tax what can’t be put in there.

Or alternatively they could simply abolish ISAs from a set date with any growth, dividends or interest after that date being taxable. There would be complaints but the rebuttal would be that people had benefited from the tax free status up to then so they haven’t actually lost anything.

Other changes that wouldn’t impact their ‘blue collar’ voters too much but would bring in more tax would be to restrict the tax relief on pensions to the basic rate, and one that would probably bring in a good chunk of tax and saved child benefit - remove the salary sacrifice mechanism for pensions (and employee cars).

[Mike4]

I'm pretty sure I heard that nice Ms Rayner on the R4 wireless a year or so ago, saying Labour would deffly introduce a wealth tax after the next GE. She went on to reassure us listeneers that the majority of us wuz quite safe as the threshold would be set at £3m.

I wuzn't reassured.

And what would the threshold be in 25 years time, I wonder?

Fiscal drag seems to be common ground for all political parties - look how long some of the IHT allowances have remained static, not forgetting the State Pensions Christmas Bonus of a magnificent £10!

Adrian

My point exactly. Or if there is not too much unrest in the masses, the £3m threshold would creep down and down so "those with the broadest shoulders are made to pay their fair share".

An appealing argument if you are left of centre and one that nice Ms Rayner is fond of trotting it out. An argument which can be applied repeatedly and without end, no matter how much 'those with the broadest shoulders' are currently being soaked for.

I'm reminded of IPT too. When introduced it was 1% IIRC, and the supporting argument was that we shouldn't be bothered as it was only a tineeee leeetle tax. 12% now.

[TUK020]

ie abolish the 25% tax free lump sum

Wouldn't that simply make pension uneconomical for basic rate tax payers. I'm not sure about you, but I wouldn't invest in a pension for zero benefit.

More likely to cap the tax free lump sum

[TUK020]

A wealth tax on pensions ?

Isn't that called the LTA?

[absolutezero]

I sold nearly all my profits six weeks ago - some not sold because the 30 days would have missed a divi -

Given the share price drops by the dividend amount on XD date, you are no better off holding on for the dividend.

[pje16]

I sold nearly all my profits six weeks ago - some not sold because the 30 days would have missed a divi -

Given the share price drops by the dividend amount on XD date, you are no better off holding on for the dividend.

Actually the price would have been "pregnant" with the dividend

[Spet0789]

I think the following are all likely under Labour.

- Rolling NI into Income tax and applying to all income (from work, from pensions, from savings, from dividends and from capital gains), with income from the last three perhaps having a minimal (say £1k) additional allowance. This would likely be combined with small upward tweaks, such as top rate to 50%.
- Reduce the annual ISA allowance to £10k.
- Apply a single rate of pensions tax relief at the basic rate.
- Cap the 25% tax free pension amount at £100k
- Introduce several higher bands of council tax, with the top rate being around 2 or 3 time more than now.

If we know one thing about Starmer, we know he’s left wing but not radical. While not aligned with my politics, all of these are reasonable and not hard to implement.

[absolutezero]

I think the following are all likely under Labour.

- Rolling NI into Income tax and applying to all income (from work, from pensions, from savings, from dividends and from capital gains), with income from the last three perhaps having a minimal (say £1k) additional allowance. This would likely be combined with small upward tweaks, such as top rate to 50%.
- Reduce the annual ISA allowance to £10k.
- Apply a single rate of pensions tax relief at the basic rate.
- Cap the 25% tax free pension amount at £100k
- Introduce several higher bands of council tax, with the top rate being around 2 or 3 time more than now.

If we know one thing about Starmer, we know he’s left wing but not radical. While not aligned with my politics, all of these are reasonable and not hard to implement.

So pretty much indistinguishable from the Conservative Party's direction of travel.
Vote red or vote blue. Either way, the Uniparty wins.

[thebarns]

Restrict or remove tax relief on pension contributions……

I think almost every year or at least every second year in the last 15 years or so, there has been heavy hinting from the media that the government is considering restricting or removing pension contribution tax relief.

And it would bring in serious amounts of money, compared to some of the other mooted Labour tax adjustments.

It would likely hit many middle to just hitting high earning people (say £50k-£90k) and have fairly limited impact at all on high earners, due to existing thresholds and limits on high earners (say £159k and above). Those around the £100k - £140k who use pension contributions to minimise the impact of the removal of the personal allowance at £100k would become particularly irate.

Labour might do it and it would cause a furore.

It would not stop people saving….that’s assuming middle to just hitting high earners have any money left at all !…. as they would need to attempt to build some sort of pot for when, if ever, they can stop working, but would make it less likely such savings are stuck in pensions.

[scrumpyjack]

I think the following are all likely under Labour.

- Rolling NI into Income tax and applying to all income (from work, from pensions, from savings, from dividends and from capital gains), with income from the last three perhaps having a minimal (say £1k) additional allowance. This would likely be combined with small upward tweaks, such as top rate to 50%.
- Reduce the annual ISA allowance to £10k.
- Apply a single rate of pensions tax relief at the basic rate.
- Cap the 25% tax free pension amount at £100k
- Introduce several higher bands of council tax, with the top rate being around 2 or 3 time more than now.

If we know one thing about Starmer, we know he’s left wing but not radical. While not aligned with my politics, all of these are reasonable and not hard to implement.

A lot of wealthy pensioners would just leave the UK, taking vast amounts of wealth with them. Also restricting pension relief to the basic rate creates significant difficulties with defined benefit schemes and one could foresee a situation where a high paid employee in a DB scheme has most of his/her pay clawed back because of the tax charge on the increased valued of their pension asset. Sir Humphrey won't like that! One can foresee some serious Laffer curve effects if they did this lot!

[thebarns]

Scrumpyjack,

A very good point about the difficulties for removal of higher rate relief for those on defined benefit schemes.

Just look at who makes up the rules - it is the Treasury/senior civil servants.

Loaded with self interest.

Just look at the farcical ways they used to value (for tax purposes) the value of defined benefit pensions by applying a multiple of 16 to said annual pension, eventually buckling to I think 20, which was still way out of line with a true market valuation.

They write the rules thinking of their own defined benefit pension pot valuations first and foremost.

This of course gets very little attention over the years, apart from the occasional switched on journalist, primarily because all MPs benefit from similar issues, but I suspect mainly steered by their self interested well paid senior civil servant officials.