Labour intentions for pensions

[Lootman]

it doesn't matter in the sense that what Starmer is doing here is giving himself cover for future tax increases on interest, dividends, capital gains, ISAs, pensions and wealth. And as long as NICs and income tax do not go up on employment income he can claim to have kept his word.

As Jack notes, the use of that phrase is designed to divide the population into two groups - the "idle" rich and the workers. And that takes you right back to Marxism.

This article from todays Guardian seems to back you up.
https://www.theguardian.com/business/ar ... c-services

Yeah, this part:

Another said the shadow chancellor wanted to take a “kitchen sink” approach in order to raise tax income and pursue radical reform and investment in public services. The person admitted: “That is not what they are presenting the public with right now.”

“Kitchen-sinking” is a tool common in political and business circles – it has been used at companies including Tesco to Nokia – in which a new leader releases all the bad news at once, thereby justifying drastic measures.

So Sunak's claim about Labour planning to jack up taxes (whilst keeping it quiet) might have credibility.

As a precaution I have already realised all the gains I planned for the 2024-2025 tax year.

[MuddyBoots]

Austerity is a myth: there's been no austerity. Every month government runs a deficit and therefore government debt grows every month.

Our local council would beg to differ, they blame government austerity for the reduction in grants from central govt, resulting in cutbacks and increases in council tax. But they would say that, they aren't an independent observer.

[Spet0789]

What’s the definition of ‘working people’?

it doesn't matter in the sense that what Starmer is doing here is giving himself cover for future tax increases on interest, dividends, capital gains, ISAs, pensions and wealth. And as long as NICs and income tax do not go up on employment income he can claim to have kept his word.

As Jack notes, the use of that phrase is designed to divide the population into two groups - the "idle" rich and the workers. And that takes you right back to Marxism.

As someone who is approaching a comfortable early retirement after years on PAYE, it would somewhat suck if I was taxed as a “broad-shouldered” high earner for the first half of my adulthood and then as idle rich for the second half.

[Spet0789]

Austerity is a myth: there's been no austerity. Every month government runs a deficit and therefore government debt grows every month.

Our local council would beg to differ, they blame government austerity for the reduction in grants from central govt, resulting in cutbacks and increases in council tax. But they would say that, they aren't an independent observer.

It’s simple. Local authority budgets were slashed so that money could be poured into pensions and the NHS. But net I agree, the government has been spending too much.

[EthicsGradient]

One way for Labour to raise the CGT rates somewhat without looking too punitive would be to put the rates for investment gains back to the same rate that (non-principal residence) property attracts, ie 18% for basic rate payers, and 24% (now) for higher rate payers (is there anything for an individual which pays 28% still? It looks like trusts still pay at 28%). The reduction to 10%/20% only happened in 2016, and basically seemed to be a giveaway to brighten that year's budget for some likely Tory supporters.

Which makes me wonder if my plan to stay under the £3,000 allowance and £50,000 reporting level this year (I have a sale I'd like to do that fits in that, but would have an insanely complicated calculation if I did have to report it), and then pay some CGT on other unsheltered sales I'd like to make in the next tax year, is not so good. Maybe I should bite the bullet on the reporting, and move the other stuff up to this year before the 10% basic rate disappears. Do people think that if Labour did change CGT rates, it'd be one of those "takes effect right now" moves to stop people bringing some sales earlier, or would they say "from the 25-26 tax year"? Getting sales brought forward might make their revenue this year better, so the latter is plausible.

[LondonChris]

This article from todays Guardian seems to back you up.
https://www.theguardian.com/business/ar ... c-services

Guardian journalist just on Andrew Marr’s LBC show giving oxygen to the CGT rate increase story – he also referred to ending unspecified CGT exemptions. Expect this story to get more coverage in the next few days which Labour may be forced to speak to as both journalists & Tories are bound to ask/press on this issue. Otherwise manifesto publication apparently pencilled in for next Thu – possibly some clarity then.

[ADrunkenMarcus]

What’s the definition of ‘working people’?

it doesn't matter in the sense that what Starmer is doing here is giving himself cover for future tax increases on interest, dividends, capital gains, ISAs, pensions and wealth. And as long as NICs and income tax do not go up on employment income he can claim to have kept his word.

If any political party is ruling out further increases to income tax, corporation tax and VAT then they have eliminated the big ones, so other taxes as you have listed above are probably likely targets. We've seen this with the current government already.

I do wish all parties would come clean about their intentions.

I don't particularly like the term 'earned income' (implying 'unearned income'), because people who have toiled, saved and invested their capital are entitled to enjoy the fruits of their labour. Their capital has already been taxed at the point of investment. They then invest it and receive a return on that. However, I think it was Nigel Lawson who equalised rates of taxation on income and capital gains and there is a legitimate debate as to whether one should be taxed more than the other. Whether the regime overall was better, I'm not sure - I believe there was indexation so that only real gains were taxed rather than nominal gains.

There is a much greater issue here insofar as we have a demographic time bomb which is not being addressed.

Best wishes


Mark.

[Wuffle]

The loopholes you can drive a coach and horses through mean not everybody 'toils, saves and invests' (or pays that much tax) in quite the way you mean though do they.

W.

[kempiejon]

Employed I contrived my tax arrangements to maximise my personal benefit. I expect to do that in retirement. Isn't paying tax part of being in society while minimising/reducing it is part of financial planning. In retirement I could wangle it not to pay tax under existing regime and hoped not to pay tax, but if I take extra income from taxable sources to indulge myself I'll have a bill. I haven't expected to pay National Insurance. I intend to continue to cash in on available benefits and services. If the system changes I'll look at my plans. I hope I don't have to get back to work and become economically active and a contributing member of society.

[Lootman]

Do people think that if Labour did change CGT rates, it'd be one of those "takes effect right now" moves to stop people bringing some sales earlier, or would they say "from the 25-26 tax year"? Getting sales brought forward might make their revenue this year better, so the latter is plausible.

I think it depends on the new rate(s) they set it to.

Right now the most CGT you pay on a disposal of securities is 20%. If the new rate for you is more than 20% then you'd be motivated to sell everything now and pay "only" 20%.

The government might want to dissuade that and make the change effective at midnight on budget day rather than on 06/04/2025. Or maybe they would like the temporary boost to revenues?

But I think the government needs to be careful. Jacking the CGT rate to say 40%, where it was back when we had indexation, would be seen as punitive. Unlike interest and dividend income, CGT collection is basically on the honour system - you declare gains that the taxman is not independently informed about. If people start becoming "forgetful" about their sales it is unlikely that more than a small minority of those cases would come to light.

On the other hand you'd be an idiot to engage in such avoidance for a 10% or 20% CGT rate.

The other ways to avoid CGT are of course to never sell, as your CGT liability dies with you. Or to emigrate - UK non-residents pay no CGT on gains from UK assets. If you plan to leave the UK anyway because of the inexorable drip-drip of targeted tax increases, then it would make sense to defer sales until you are gone.

One other (horrible) thought. Could Labour consider moving to a mark-to-market method of taxing capital gains?

[LondonChris]

Unlike interest and dividend income, CGT collection is basically on the honour system - you declare gains that the taxman is not independently informed about. If people start becoming "forgetful" about their sales it is unlikely that more than a small minority of those cases would come to light.

I am not really sure this is completely correct. They may not have precise data on disposals, but my understanding is that they probably are aware of certain events happening. By all accounts HMRC has an exceptionally powerful database which has a hell of a lot of data on us. For example, if you own a second home HMRC automatically knows because ownership is recorded obviously by Land Registry and they provide data to HMRC. HMRC would be aware of a change in ownership of a second home. Clearly our trading platforms have data on whether we have sold an investment - does anyone know whether HMRC have access to this information ? If a trading platform informs HMRC of our dividends during the year they might provide other data. In short I don't know the answer. But I do know HMRC's database is apparently pretty powerful - and I think it would be dangerous to assume they don't have a fair amount of information on us.

[Lootman]

Unlike interest and dividend income, CGT collection is basically on the honour system - you declare gains that the taxman is not independently informed about. If people start becoming "forgetful" about their sales it is unlikely that more than a small minority of those cases would come to light.

Clearly our trading platforms have data on whether we have sold an investment - does anyone know whether HMRC have access to this information ? If a trading platform informs HMRC of our dividends during the year they might provide other data. In short I don't know the answer.

It is possible that disposals are reported(*). But cost basis is trickier as that may depend on holdings in the same security held elsewhere. Or it may be a position that was imported from another brokerage, with no cost basis available.

So I still think that the taxman is more reliant upon self-assessment for CGT than it is for interest, dividends, employment income, pension income etc. And that currently works well because CGT rates are considered to be low and acceptable.

(*) Of course for a short position it is the acquisition that constitutes a realisation and not the disposal, further complicating things.

[Alaric]

One other (horrible) thought. Could Labour consider moving to a mark-to-market method of taxing capital gains?

There is a precedent of sorts in the taxation of life assurance funds. I think it was back in the days of Nigel Lawson that the concept of deemed disposal was introduced. The idea was that for holdings of unit trusts, part of the holding was deemed to be sold and repurchased every year, thus giving rise to taxation on unrealised gains.

The downside of a wider use of mark to market taxation is the amount of tax lost or even reclaimed in the event of a market downturn or crash.

At the risk of making the tax system ever more complicated, an Amercican style approach could be applied to collective funds. That's where when the collective disposes of an asset, it's reported as a taxable event for individual holders.

[ADrunkenMarcus]

At the risk of making the tax system ever more complicated, an Amercican style approach could be applied to collective funds. That's where when the collective disposes of an asset, it's reported as a taxable event for individual holders.

Nuts, IMHO.

Best wishes


Mark.

[scrumpyjack]

The FT reports that Labour has abandoned plans to reintroduce the LTA

[airbus330]

Discussing the FT article on Sky news tonight. As I kind of suspected, its too difficult to do with our nightmare-ishly complex tax system. Well, at tleast its one danger perhaps kicked into the dust. Hopefully any threat to the tax free element will also crumble in the face of the complexity.
https://www.ft.com/content/1555f473-0b8 ... d57d5f2f36

[moorfield]

The FT reports that Labour has abandoned plans to reintroduce the LTA

There are still plenty of levers they can fiddle with:
- reduce the £268025 tax free lump sum
- a flat rate tax relief on contributions
- a cap on pension size exempt from IHT

The first and third of those are low hanging fruit , because they are unlikely to p1ss off "working people", whereas the second might.

[kempiejon]

NI on pensions seems unlikely. Cut to NI seems foolish.

[JohnB]

https://www.bbc.co.uk/news/articles/c3gg1l49832o is the Papers se tion of the BBC website where you can read the article on the FT front page in facsimile

[tjh290633]

NI on pensions seems unlikely. Cut to NI seems foolish.

The current government have been doing it by stealth. That's why they have been reducing NICs, while not indexing personal allowances. That way they will have pensioners and others with unearned income paying income tax which now incorporates NICs.

It's obvious to me, as one who has been caught by this stealth approach.

TJH