Budget 2024

[Adamski]

The problems we've got are structural.

So Jeremy Hunt tinkering around the edges isn't going to fix the problem. I doubt Labour will either.

Because the structural issues are deep routed and require major reform:

* an ageing population
* decline in the private sector
* high and growing taxes
* high and growing debt
* high level of state, regulation
* expensive energy
* unaffordable housing
* permacrisis in public sector

Our gdp only increases with immigration and population growth, but gdp per capita is stagnant.

The fixes required would be unacceptable to the political class and media. Labour will simply grow the state, public sector.

We'll hopefully come through cost of living, inflation crisis. But I'd be amazed if 'green growth' and investing in our NHS will solve the problems. Over half population is in receipt of more benefits than they pay in.

The liklihood is continuing tax and spend. And effectively open borders. The population feels hard done by so politicians will continue to squeeze harder those that pay in. I'd expect it to accelerate under labour.

[XFool]

Look past Starmer and Reeves, to the backbenchers - hamas supporters, purple haired socialists and unhinged greens.

I propose, brother, that we move as urgently as possible to instigate an International 'Spot the Purple Haired Socialist' Day.

[Tedx]

How are pensions tax free, apart from the 25% lump sum allowance? Have I missed a trick?

You're right, it makes no difference really, from an Income Tax point of view. If you've got spare capacity in an ISA, take the lump sum and put it there if you want. Otherwise leave it in the SIPP till later.

For the taxable portion of the SIPP it makes sense to withdraw at a rate that keeps you in as low a tax bracket as possible.

There are potential Inheritance Tax advantages to leaving as much as possible in the SIPP though.

Scott.

Its not just IHT because if you die pre a75 the pension is paid out to your beneficiaries tax free (I'm sure you know that ).

[Lootman]

How are pensions tax free, apart from the 25% lump sum allowance? Have I missed a trick?

You're right, it makes no difference really, from an Income Tax point of view. If you've got spare capacity in an ISA, take the lump sum and put it there if you want. Otherwise leave it in the SIPP till later.

But won't you pay income tax on the future growth on anything you leave in a SIPP? The same holdings in an ISA will never suffer future tax.

So isn't there a case for taking £20,000 a year out of a SUPP and putting it in an ISA, if you cannot otherwise fund an ISA annually?

Point taken on IHT but the question was "from an Income Tax point of view".

[swill453]

But won't you pay income tax on the future growth on anything you leave in a SIPP? The same holdings in an ISA will never suffer future tax.

No, because the amount of tax free cash you can get grows too (assuming it stays within the limits).

e.g. £100 in SIPP fully crystallised gives £25 tax free cash to put in ISA and £75 remains. Assume 100% growth in each this becomes £150 SIPP plus £50 in ISA.

vs.

Leave £100 in SIPP instead, after same 100% growth becomes £200. Fully crystallised gives you £50 tax free for ISA with £150 remaining in SIPP.

So exactly the same.

Scott.

[swill453]

So isn't there a case for taking £20,000 a year out of a SUPP and putting it in an ISA, if you cannot otherwise fund an ISA annually?

There is of course an argument for that, rather than having too much at once. But offset against the death benefits of leaving it in the SIPP.

Scott.

[MrFoolish]

I am curious why you think nobody pays CGT? On an investment website of all places?

I have paid CGT every year going back twenty years. In fact I pay more in CGT annually than I do in income tax or any other tax

Oh I know people make capital gains. Sunak makes the bulk of his income from capital gains and he pays a lower rate of tax than a nurse.

I just wanted to know why Nimrod is so concerned about this tax but he won't answer. I expect his reasons contradict his gripes about the tax.

[Lootman]

But won't you pay income tax on the future growth on anything you leave in a SIPP? The same holdings in an ISA will never suffer future tax.

No, because the amount of tax free cash you can get grows too (assuming it stays within the limits).

e.g. £100 in SIPP fully crystallised gives £25 tax free cash to put in ISA and £75 remains. Assume 100% growth in each this becomes £150 SIPP plus £50 in ISA.

vs.

Leave £100 in SIPP instead, after same 100% growth becomes £200. Fully crystallised gives you £50 tax free for ISA with £150 remaining in SIPP.

So exactly the same.

Scott.

OK yes I guess I was thinking more of the case where I have already taken my 25% tax-free. So the rest plus any gains is subject to income tax. I might instead transfer to an ISA. In fact even in a taxable account I may pay less in dividend tax and CGT on future returns than I would pay in income tax withdrawing from a SIPP.

But that said I do not have a SIPP so it is just an academic question for me.

[swill453]

OK yes I guess I was thinking more of the case where I have already taken my 25% tax-free. So the rest plus any gains is subject to income tax. I might instead transfer to an ISA.

But the same arithmetic applies.

£100 drawn from SIPP at 20% tax gives £80 to put in ISA. 100% growth in ISA makes it £160.
vs.
£100 left in SIPP with 100% growth makes £200. Withdraw at 20% tax gives £160 to put in ISA.

(Assumes tax rate stays the same.)

Scott.

[ukmtk]

I intend to take my 25% tax free from my SIPP and put it into an ISA.
This would mean that the income from the ISA is now tax free (not 20% tax as previously in the SIPP).
I intend to use my SIPP as an income generator in drawdown - it currently generates 6%.
I would put the higher income generators in the ISA.
I am very lucky as my SIPP will top up my company DB scheme that I started collecting at 60.

[scotview]

I am very lucky as my SIPP will top up my company DB scheme that I started collecting at 60.

Is that a public sector DB pension, or as you say one of the last Company schemes ?

[ukmtk]

One of the last company DB schemes.
It's why I stayed at the company for the last 28 years - it's only the second company I have worked for in the last 40 years.
As they closed the DB scheme at 60 they have now started paying 35% of my salary into a SIPP.
I consider myself very lucky.

[Steveam]

I found this discussion on the shift in taxation very interesting. I think Hunt has done (a little) better than I expected.

Fiscal drag broadens the tax base and there is an effective increase in the tax raised from personal savings and investment.

https://www.bbc.co.uk/news/business-68516710

Best wishes, Steve

[XFool]

I found this discussion on the shift in taxation very interesting. I think Hunt has done (a little) better than I expected.

Fiscal drag broadens the tax base and there is an effective increase in the tax raised from personal savings and investment.

https://www.bbc.co.uk/news/business-68516710

From the linked article:

"This "fiscal drag" will mean over three million more higher-rate taxpayers, and nearly four million more low earners paying tax."

"The government is shifting the tax burden away from workers towards all forms of income including savings and pensions."

Although understandably likely unpopular hereabouts, that seems fair and to make sense. However, from the preceding paragraph:

"On current trends, a recipient of the full basic state pension alone is also on course to have to pay tax, and perhaps *fill out a tax return in 2026/27*."

That's the thing that continues to really irritate me about this.

[Nimrod103]

I found this discussion on the shift in taxation very interesting. I think Hunt has done (a little) better than I expected.

Fiscal drag broadens the tax base and there is an effective increase in the tax raised from personal savings and investment.

https://www.bbc.co.uk/news/business-68516710

From the linked article:

"This "fiscal drag" will mean over three million more higher-rate taxpayers, and nearly four million more low earners paying tax."

"The government is shifting the tax burden away from workers towards all forms of income including savings and pensions."

Although understandably likely unpopular hereabouts, that seems fair and to make sense. However, from the preceding paragraph:

"On current trends, a recipient of the full basic state pension alone is also on course to have to pay tax, and perhaps *fill out a tax return in 2026/27*."

That's the thing that continues to really irritate me about this.

Why should it irritate you? It's called inter-generational equity, and younger people have been arguing for it for a long time.

[XFool]

Why should it irritate you? It's called inter-generational equity, and younger people have been arguing for it for a long time.

You are missing my point. I said: "that seems fair and to make sense"

I went on to say:

fill out a tax return in 2026/27 *

"That's the thing that continues to really irritate me about this."


* I had marked this for bold font, for emphasis, but it got overlooked in the editing.

[Nimrod103]

Why should it irritate you? It's called inter-generational equity, and younger people have been arguing for it for a long time.

You are missing my point. I said: "that seems fair and to make sense"

I went on to say:

fill out a tax return in 2026/27 *

"That's the thing that continues to really irritate me about this."


* I had marked this for bold font, for emphasis, but it got overlooked in the editing.

Ah OK. I can see both sides of the argument on the need for more people to fill in tax returns. Personally I don't have a problem because I have been filling them in ever since self assessment was introduced. But I can see that for some it would be mentally quite challenging, or an apparently unnecessary chore. But there are so many people with small amounts of income from various sources (both earned and unearned though I dislike those terms immensely), I don't see how those income streams can be taxed and policed except via self assessment. It would have been better if Sunak and Hunt had retained the seperate tax free limits for dividends, interest and CG, but my personal view is that both of them are mendacious and incompetent, and too much under the Treasury's thumb.

[XFool]

Ah OK. I can see both sides of the argument on the need for more people to fill in tax returns. Personally I don't have a problem because I have been filling them in ever since self assessment was introduced. But I can see that for some it would be mentally quite challenging, or an apparently unnecessary chore. But there are so many people with small amounts of income from various sources (both earned and unearned though I dislike those terms immensely), I don't see how those income streams can be taxed and policed except via self assessment.

How quickly people forget!

Before George Osborne's changes to the taxation system in his 2013 budget the overwhelming number of people on BR Tax, including myself, did not need to complete SA.

For myself the history was:

Over my entire working life (until the introduction of SA) I seem to recall having been asked to fill in a paper tax return no more than three times. When SA was introduced, from what I had read about it in the media it was not something I expected to apply to myself. To my surprise (and likely to others) I received a flurry of SA demands all in a short period, about three in total - one for the previous tax year, one for the current tax year and then shortly another one for the new tax year. I filled then in for a few years following then they were ceased (as with many others), there being no actual reason for them. They were usually all for small amounts of money - this year I 'owed' HMRC 89p, next year HMRC 'owed' me £1.22 etc. Usually these figures were nothing more than the consequences of arithmetical rounding.

The point being that all BR income tax was already taken at source, via PAYE, deduction from interest and the effective 0% dividend tax rate for BR tax payers. The only people who needed to do SA were higher rate taxpayers (not covered by BR taxation at source) or people with genuinely complex financial affairs. OK, people who were effectively on zero rate income tax also needed to apply to have deducted BRT from interest returned to them.

Then along came Osborne and his 2013 budget. I remember, on the afternoon of his budget, pointing out on TMF that surely the changes implied many more people, even on BRT, would end up needing to complete SA - to several sceptical replies pointing out how I was mistaken...

Later I pointed out to HMRC that, looking at their online information, I thought it seemed I might qualify for SA. I have been doing them ever since.

Interestingly, like most people I assume, I have never literally done my own tax 'Self Assessment', just completed the HMRC forms on paper or online. The nearest I have ever come to literal SA was before Osborne, when my own 'Tax SA' was completed in a couple of minutes every year, on one small Post-It-Note. But that was then.

[Lootman]

The point being that all BR income tax was already taken at source, via PAYE, deduction from interest and the effective 0% dividend tax rate for BR tax payers. The only people who needed to do SA were higher rate taxpayers (not covered by BR taxation at source) or people with genuinely complex financial affairs. OK, people who were effectively on zero rate income tax also needed to apply to have deducted BRT from interest returned to them.

Then along came Osborne and his 2013 budget. I remember, on the afternoon of his budget, pointing out on TMF that surely the changes implied many more people, even on BRT, would end up needing to complete SA

I prefer to do a SA and have no tax withholding, to the alternative. And then just settle up once a year. That way the taxman never owes me and I feel in control of the process. And since I submit my return on paper, I have no need to have an online account with HMRC, nor to communicate with them in any other way.

In the US every single person has to submit a self assessment tax return and there does not seem to be a problem with that. The UK move to self assessment was a great step forward in my view.

[XFool]

I prefer to do a SA and have no tax withholding, to the alternative. And then just settle up once a year. That way the taxman never owes me and I feel in control of the process. And since I submit my return on paper, I have no need to have an online account with HMRC, nor to communicate with them in any other way.

Whereas I prefer simplicity. Also, that which introduces the minimum amount of 'bureaucracy', for the most people, seems to me generally the better option.

In the US every single person has to submit a self assessment tax return and there does not seem to be a problem with that. The UK move to self assessment was a great step forward in my view.

I have never subscribed to the view: "This is what they do in the USA. So we should do this too."