My pet scheme as armchair CofE for raising serious revenue is to abolish salary sacrifice and discount the tax bill for desirable behaviours such as pension contributions:
1. You get to collect NI on all the salary and not just the residual income after salary sacrifice 2. You can set the discount rates separately from the original tax bands 3. The discount appears as a gift from the government on people's tax bills.
Increase CGT rates (don't think there is any margin in the threshold which is too low anyway (sucks in not worth bothering about stuff currently)). IHT I can't see changing. For some odd reason people feel strongly about the IHT threshold and the rate is high anyway. Although people do think this is an area for increases, but I struggle to see how. Remove the last NI reductions the Tories introduced. Restrict pension payment tax relief to a pension fund to the 20% band for both DC and DB pensions. Starting point of 45% band of income tax reduced to £100,000 or introduce a 50% band at £150,000. Start the loss of PA at say £75,000 (but if you do, make it slower than currently, which is too much of a change, say a £1 for every £5 earned instead of £1 for every £2 earned as it currently is. This still creates steps in the tax graph, but it is not as brutal as before)
I have not the foggiest what that lot adds up to, but it must be a lot and nobody would do all of it.
PS And as a give away increase the PA.
These all sound feasible, I guess whether or not the public find any or all of them acceptable is how "fair" they feel. Fairness being assessed as "yes I'm being hit financially, but not as much as those with far more money than I have, and in any case both I and those with more will still have an acceptable standard of living"?
I don’t really see why the Personal Savings Allowance shouldn’t go completely at this point. In an environment of low rates it was perhaps a slight nudge towards saving, but with the other incentives in the system now I don’t think it should be included.
I’d be in favour of retaining the ISA system but removing the PSA. If Reeves wants to nudge the ISA allowance a few k downwards I don’t see tremendous harm in that, but I’d caution against anything more drastic.
Make still more sense to do that and make the banks pay basic rate tax on non-ISA interest at source, to take the opportunity of simplification.
The system works reasonably well now with the banks informing HMRC after the tax year finishes.
I hope so, though my experiences have not been very happy - maybe things will be better now as they settle down.
Taking the longer view, the combination of ISAs and these various savings tax allowances has had the effect of shifting almost all savings income for almost everyone out of any liability for tax. Another policy feature that has had the effect of favouring the older generation.
Why savings income should enjoy much greater exemption from tax (and of course never attracts NI) than earned or other forms of income isn’t clear?
It’s specifically intended to tilt the scales in favour of saving vs consumption.
The assessment is that saving results in capital formation which enhances investment.
You may disagree with that objective or assessment, but the intention is clear
Yes I am quite surprised at how many people don't know about that. On several occasions I have had to explain it to people who can't work out why their tax bill is less than they were expecting. The typical person it helps is pensioners on just a state pension but who have put by a nest egg in savings. It doesn't help earners on anything over a modest salary or pensioners taking anything over a modest pension in addition to their state pension so it would be rather mean if Reeves removed it.
The only disadvantage to it is most people don't know about it, but as it kicks in automatically that isn't an issue other than confusion over how much tax they are paying.
Does the same apply to dividend income ?
Personal Savings Allowance and a Starting Rate of zero for first 5K seems an odd mixture policy-wise. Why are their two different schemes? Maybe I am missing something?
Pandering to people who had savings income rather than salaries. Who are a certain age and vote a certain way. Is the only explanation I can think of.
The other one was savings rates were extremely low (sub 1%??) when it was introduced so didn't cost much and reduced admin. But yes, client vote.
I disagree with you both that it is a bribe for the simple reason that the vast majority of people don't know it exists so it is a crap bribe. I would be surprised if 1 in a 100 people have heard of it, because it impacts so few people and happens automatically.
I just think it is a very sensible idea. The £1000 for basic rate payers and £500 for higher rate payers is an admin allowance to keep small amounts out of the tax system whereas the £5000 (which reduces to nothing as your earned income increases) is a useful benefit for poor pensioners who have put a nest egg by.
FYI the recent decrease in some of these allowances I think were a mistake. The reduction of the dividend allowance to £500 and the CGT to £3000 I think was wrong because it brings into play some petty stuff with huge admin attached. if the Govt wanted to bring in more revenue it could have kept the old thresholds for qualifying, but if you did qualify start the tax calculation at a lower threshold figure. So only a very small loss of revenue without bringing in petty dividends or gains.
I shouldn't say this but I wonder sometimes how many people actually pay tax on their dividend income. They used to be paid net, no?
I think you are right on your first sentence. Re the 2nd sentence - The combination of Brown, Osborne and Hammond completely screwed up the Dividend Tax. Brown really, but Osborne promised to put it right, but lied and Hammond put the nail in the coffin. Regarding whether it was net or not is complicated. Originally it was linked to Corporation Tax. Too complicated to explain here and now, but basically it was a neat set up to avoid double taxation on a business earnings. If a company paid a dividend it paid Advanced Corporation Tax (ACT) on it which could be set off against the Corporation Tax when it was due. Any excess was carried forward. The person receiving the dividend received a tax credit. They paid tax on their income including the dividend income, but claimed back the credit. You could claim back the credit even if you didn't pay tax. Brown saw this as an opportunity to tax people without them noticing, because by disallowing the reclaim if you didn't pay tax he saw an opportunity to tax pension funds (which people didn't notice). Osborne promised to sort this out, but actually didn't. He removed the credit from everyone and gave them a £3000 allowance instead. By the time it got to Hammond everyone forgot what it was all about and Hammond said £3000 is a lot, lets reduce it to £500. And a perfectly logical tax system was destroyed.
If of course you get dividends from overseas this system still exists and HMRC still recognises it.
People over state pension age in employment to pay NI even at a reduced rate of say 5%. Introduce CGT on sale of primary residential property. Again maybe a reduced rate of 10%. Reduce savings allowances. Reduce 45% tax band to 100,000 and spread the reduction of the personal allowance up to about £150k.
Reeve isn't stupid. The budget will surely have some tax grabs from the well off - pension tax relief on higher earners for example and goodies for everyone else - increase the basic tax threshold for example.
She should raise personal allowance marginally to ensure people on a basic state pension and a bit of interest from savings don't need to pay income tax. The increase in personal allowance should be restricted to pensioners and would part offset the removal of the winter fuel allowance.
I've advise anyone with a pension or an isa to put away everything they can into it during September and October, as soon as they can.
Don't think I've ever seen such crap advice in my life.
Basically it would be impossible for things to change this tax year so don't stress about it.
Any pension changes will occur from April 6th 2025 because anything else would be hell to organise. As anyone who understands pensions or tax will tell you..
Literally the only thing you can change mid-year is NI and VAT..
"As anyone who understands pensions or tax will tell you."
Erm, I advised on taxation of pension schemes for >20 years. I'm still making use of my current and previous years' unused AA before the budget, just in case. Immediate change to the AA, and/or to the rate of relief, is not impossible, certainly in DC schemes. Annoying as **** to administer, but not impossible. I could write the Finance Bill clauses required on one sheet of A4
Update from yesterday. So I tweeted out a request for baptismal pools (aka full immersion fonts) installed in Church of England churches, and by the end of the day I had a list of 25+ modern ones (ie post war) - below. Only 2 are from me.
One was installed in a mining village near me in the 1990s. St Peter, Plymouth is an Anglo-Catholic shrine which did a huge building project in ~2007 in a deprived area about which a neighbouring Roma Catholic priest wrote a thesis. There's one near Tunbridge Wells installed in 1710 as a counter to local new (then) 'baptist' movements (it apparently has not been used very much - once on record!). And St Michael le Belfrey in York are installing one this year with an up-and-down hydraulic floor to guarantee accessibility for people who can't do steps as part of a major refurbishment project.
My photo quota today is the baptistry at SS Peter and Paul, Hucknall, Notts - a local one I did not know about. It very much of its time, but the joy of church architecture is that the history of the community can be read for decades or centuries.
List of some CofE places with baptistries. My 150-200 estimate may be low.
All Saints, Huthwaite, Notts All Saints, Wellington Christ Church Chineham, Basingstokee Christ Church, Bromley. Christ Church, Gypsy Hill, London Church of Christ the Cornerstone, Milton Keynes Church of the Resurrection, Grovehill, Hemel Hempstead Greyfriars, Reading Holy Trinity, Norwich Portsmouth Cathedral Salisbury Cathedral – I think SS Peter & Paul, Aston , Birmingham SS Peter and Paul, Hucknall , Notts St Andrew the Great, Cambridge St Andrew, Goldsworth Park, Woking St Andrew, Walthamstow St George, Britwell St John, Egham St Mary-at-Lambeth St Matthew, Wigmore St Matthias, Leeds St Michael-le-Belfrey, York St Nicholas, Nottingham, Notts St Paul, Margate St Peter, Plymouth St Thomas, Newcastle
Historically all fonts are baptistries, and CoE baptism is by immersion. This is the BCP 1662 text:
Then the Priest shall take the Child into his hands, and shall say to the Godfathers and Godmothers, Name this Child. And then naming it after them (if they shall certify him that the Child may well endure it) he shall dip it in the Water discreetly and warily, saying,
N. I baptize thee in the Name of the Father, and of the Son, and of the Holy Ghost. Amen.
But if they certify that the Child is weak, it shall suffice to pour Water upon it, saying the foresaid words,
N. I baptize thee in the Name of the Father, and of the Son, and of the Holy Ghost. Amen.
Yes I am quite surprised at how many people don't know about that. On several occasions I have had to explain it to people who can't work out why their tax bill is less than they were expecting. The typical person it helps is pensioners on just a state pension but who have put by a nest egg in savings. It doesn't help earners on anything over a modest salary or pensioners taking anything over a modest pension in addition to their state pension so it would be rather mean if Reeves removed it.
The only disadvantage to it is most people don't know about it, but as it kicks in automatically that isn't an issue other than confusion over how much tax they are paying.
Does the same apply to dividend income ?
Personal Savings Allowance and a Starting Rate of zero for first 5K seems an odd mixture policy-wise. Why are their two different schemes? Maybe I am missing something?
Pandering to people who had savings income rather than salaries. Who are a certain age and vote a certain way. Is the only explanation I can think of.
The other one was savings rates were extremely low (sub 1%??) when it was introduced so didn't cost much and reduced admin. But yes, client vote.
I disagree with you both that it is a bribe for the simple reason that the vast majority of people don't know it exists so it is a crap bribe. I would be surprised if 1 in a 100 people have heard of it, because it impacts so few people and happens automatically.
I just think it is a very sensible idea. The £1000 for basic rate payers and £500 for higher rate payers is an admin allowance to keep small amounts out of the tax system whereas the £5000 (which reduces to nothing as your earned income increases) is a useful benefit for poor pensioners who have put a nest egg by.
FYI the recent decrease in some of these allowances I think were a mistake. The reduction of the dividend allowance to £500 and the CGT to £3000 I think was wrong because it brings into play some petty stuff with huge admin attached. if the Govt wanted to bring in more revenue it could have kept the old thresholds for qualifying, but if you did qualify start the tax calculation at a lower threshold figure. So only a very small loss of revenue without bringing in petty dividends or gains.
I shouldn't say this but I wonder sometimes how many people actually pay tax on their dividend income. They used to be paid net, no?
AIUI it's notified to HMRC by the payer. So it's risky not to declare it ...
I don't think it is. Savings income is, but I don't think dividends are. Happy to be contradicted.
In fact thinking about it I didn't have to declare (as a company) dividends I paid myself from my company to me. I had to declare them as an individual on my tax returns, but no company declaration was made.
My pet scheme as armchair CofE for raising serious revenue is to abolish salary sacrifice and discount the tax bill for desirable behaviours such as pension contributions:
1. You get to collect NI on all the salary and not just the residual income after salary sacrifice 2. You can set the discount rates separately from the original tax bands 3. The discount appears as a gift from the government on people's tax bills.
There must be downsides for them.
Doesn’t that mean everyone has the do a self assessment?
The advantage of salary sacrifice is it can run through PAYE
Mythical very well off person who has retired early at say 55 with £1m in savings. Not taking any pension yet.
£500k in ISAs, £500k invested in other investments / bank deposits.
Assuming 5% return, total income = £50k.
ISA income = £25k, tax = £nil.
Other income = £25k. £19,070 tax free (12,570+5,000+1,000+500). Tax = 20% * 5,930 = £1,186.
So tax bill on £50k income is just over £1k.
Yes, that looks like entirely mythical person.
I don't like the idea of taxing things twice.
If you've invested income that has already been taxed, I'm not sure it should be taxed again just because you didn't spend it. When you do spend it, most things attract 20% VAT in any case.
If you have investments from money which you didn't earn, that might be a different matter. So perhaps only allow earned income to go in an ISA? No reinvestments and no inheritances?
I would agree that 40% tax relief on pensions is overly generous.
What's the average tenure of a prime minister since Cameron left office?
May - 3 years 11 days Johnson - 3 years 44 days (includes leap year) Truss - 49 days Sunak - 1 year 254 days (includes leap year) Starmer - 53 days not out
So, calculated on a cricketing basis, the current average is 742 days, or 2 non-leap years and 12 days.
Just under two years without Starmer's contribution.
From Thatcher's election in 1979 Britain had three Prime Ministers in 28 years. Even with Cameron's six year stint, the following 17 years have seen seven Prime Ministers.
It's a symptom of malaise.
Ideally Starmer will be a stunning success and a grateful nation will give him a decade in the top job. But I'm not seeing it at the moment.
Equal pay for the same job is fair. Equal pay for different work is nuts.
Morning Morris Dancer, yes it is. Especially when you have the judiciary deciding the value of each job. There are other claims too in a similar vein, Tesco and Asda. I expect they will be won too.
For the BBC website a group called Oasis is the most important news item in the world today.
This is deranged.
In other news, Ellie Reeves was awful on R4 Today.
She was not great on GMB either. Whiny nasal monotone and lots of "err's" and "umm's".
Labour need better speakers to present their case.
First, most politicians are bad speakers and interviewees. These are learned skills but most spend their careers actively avoiding opportunities to learn them. Jeremy Corbyn was a good speaker not because he was naturally gifted but because he'd spent decades addressing crowds on street corners. Gordon Brown was rubbish in a studio because he'd dodged interviews for his whole career.
We see this often in American presidential elections which are so long and involve so many rallies that often the candidates are noticeably better come election day.
But Labour also has the self-imposed Brexit problem, which is that if a coherent case is not made before the ballot, no-one, not even on your side, knows what to say afterwards. The Brexiteers settled nothing beforehand, and Labour's Ming vase tactics mean that not even Keir Starmer knows what comes next.
Good points. But politics watchers who voted Labour knew perfectly well what Labour had to do to be sure of winning an election, and the Ming vase and all that. But it is a reasonable expectation that the new government are also prepared and on the front foot for the post-election reality. Single issue mistakes and unconfident stumbling are no substitute for direction of travel and clear outlines of long term solutions. The next few months will be important, as by Christmas they will no longer be able to rest on the anti-Tory case.
I voted labour. I am not impressed so far but I still don't regret it.
Just whining how crap things are is not going to exactly inspire economic confidence when we really do need it. It is early days at the mlment.
I also think Labour have dropped the ball on the Youth Mobility Scheme, they should snap the EU's hands off for it.
Agree. Labour are hugely misunderestimating the place of public discourse in inspiring and setting the direction of travel. There are periods when you need Grade A hopey changey journey together with clear destination stuff in addition to top quality governance competence and safe pairs of hands in the slips. Like now.
Yes - you need a positive vision. Pain, but for a goal, is politically sellable. It's all going to be shit for the foreseeable, on the other hand....
That's because the intended goal wouldn't be somewhere people like.
QAnon conspiracy theorist/self-proclaimed "prophet" Johnny Enlow reports that Trump will soon receive the endorsement of "a major name star that has been assumed to be dead for a long time." https://x.com/RightWingWatch/status/1828151052761178373
Comments
1. You get to collect NI on all the salary and not just the residual income after salary sacrifice
2. You can set the discount rates separately from the original tax bands
3. The discount appears as a gift from the government on people's tax bills.
There must be downsides for them.
The assessment is that saving results in capital formation which enhances investment.
You may disagree with that objective or assessment, but the intention is clear
If of course you get dividends from overseas this system still exists and HMRC still recognises it.
NEW THREAD
Introduce CGT on sale of primary residential property. Again maybe a reduced rate of 10%.
Reduce savings allowances.
Reduce 45% tax band to 100,000 and spread the reduction of the personal allowance up to about £150k.
Erm, I advised on taxation of pension schemes for >20 years. I'm still making use of my current and previous years' unused AA before the budget, just in case. Immediate change to the AA, and/or to the rate of relief, is not impossible, certainly in DC schemes. Annoying as **** to administer, but not impossible. I could write the Finance Bill clauses required on one sheet of A4
Then the Priest shall take the Child into his hands, and shall say to the Godfathers and Godmothers, Name this Child. And then naming it after them (if they shall certify him that the Child may well endure it) he shall dip it in the Water discreetly and warily, saying,
N. I baptize thee in the Name of the Father, and of the Son, and of the Holy Ghost. Amen.
But if they certify that the Child is weak, it shall suffice to pour Water upon it, saying the foresaid words,
N. I baptize thee in the Name of the Father, and of the Son, and of the Holy Ghost. Amen.
Marvellous wording.
In fact thinking about it I didn't have to declare (as a company) dividends I paid myself from my company to me. I had to declare them as an individual on my tax returns, but no company declaration was made.
The advantage of salary sacrifice is it can run through PAYE
I don't like the idea of taxing things twice.
If you've invested income that has already been taxed, I'm not sure it should be taxed again just because you didn't spend it. When you do spend it, most things attract 20% VAT in any case.
If you have investments from money which you didn't earn, that might be a different matter. So perhaps only allow earned income to go in an ISA? No reinvestments and no inheritances?
I would agree that 40% tax relief on pensions is overly generous.
@oasis
The guns have fallen silent.
The stars have aligned.
The great wait is over.
Come see.
It will not be televised.
https://x.com/oasis/status/1828341740572479734
No
It will be livestreamed on TikTok and Instagram for hundreds of thousands of people to watch instead...
Task force members here in Butler today, surveying Trump shooting scene:
R-Laurel Lee
R-Mike Kelly
R-David Joyce
D-Jason Crow
D-Madeliene Dean
D-Chrissy Houlihan
D-Glenn Ivey
D-Jared Moskowitz
D-Lou Correa
4 Republicans absent
https://x.com/JoeKhalilTV/status/1828137939634921678