Reform is also required because it is inappropriate to provide higher rates of tax relief on savings to the already wealthy than that provided to those less well-off. Ding so is clearly economically and ethically unjustifiable.
£14.5 billion could be raised by this reform, which is more than many suggest could be raised by a wealth tax each year.
Now run your numbers again with pensions paid being subject only to a maximum 20% income tax rate.
Because it would be notably unfair to tax folk 25% on money going into the pension and then 45% on it coming out again, wouldn’t it?
There is a good point to reducing the relief on pensions to 20% across the board, but Spud has missed it.
It relates to drop in employees NI from 12 to 2% when income goes above 50k . PAYE tax does rise from 20 to 40% at the same point but you can avoid that rise by offloading into a pension.
Example ignoring employer NICs:
Mr Needthemoney Now gets a promotion from 50k to 60k – pays £4200 income taxation on that slice.
Mrs Takethemoney Later gets a promotion from 50k to 60k – offloads 10k into pension – pays £1500 income taxation when taking it assuming is a 20% taxpayer when retired, and accounting for 2500 being tax free.
Mrs Takethemoney Later pays marginal rate less on that slice than on earnings not offloaded between 40-50k in this example.
She still only pays £3000 on the slice between 50-60k if she’s a 40% taxpayer when retired.
@Bongo: quite right, everyone should get a fixed relief. And as for NI, it should be folded into income tax and the latter should start at minimum wage. I know Tim is big an taking people out of tax, but this is a very bad idea: we all need to feel when the state wants more (although not proportionally!)
You can fuck the fuck off with a flat rate of relief on pension contributions. If you take at a higher rate then you provide relief at the same rate. And if you don’t people will put the money elsewhere (like an ISA) so it won’t generate as much tax revenue as expected.
I’ll restrict pensions to Basic relief once Final salary schemes in the public sector are consigned to the realms of history? No? then do f%£k off to the pub. Oops – I forgot maybe the ban extended from Downham Market to Ely.
You could of course run a series of videos teaching people how to get accountancy qualifications if you hadn’t used a ‘ringer’ to sit your exams.
If all ‘30’ of these suggestions are of this calibre this could make ‘The Courageous State’ look like ‘The General Theory’.
“if you hadn’t used a ‘ringer’ to sit your exams.” Did he? Is there evidence?
I always enjoyed the contrast between two of the Kennedy brothers. JFK was quite fly and had his senior dissertation at Harvard written for him by a “ringer”. Ted was stupid, sent a “ringer” in to take his Spanish exam, was caught, and expelled.
Naturally, Harvard being Harvard, the crook was later readmitted. Just think, if Harvard had behaved honourably maybe that poor girl he killed wouldn’t have been cut off in her prime.
It wasn’t a girl it was a chap. A Quidditch game which went off road.
He hasn’t mentioned the most obvious pension tax break – the 25% tax free amount. Presumably he is keeping quiet about that as he hasn’t yet taken his own pension.
If the theory that higher rate tax relief for pensions is “unfair” why not extend it to everything?
I get 40% tax relief on buying a computer for work. Is it unfair that a basic rate taxpayer would only get 20%? Is it a “subsidy” for me?
What Spud never mentions is that high paid employees are already restricted. Earn £360k or more and the maximum annual pension contribution on which you can get tax relief is £10k.
I have no idea why anyone pays into a pension scheme nowadays. Its blatantly obvious that your money is going to be stolen by the likes of Spud at some point in the not too distant future, to spaff up the wall on some ludicrous scheme or other. Or just expropriated because they don’t like you.
@ dearieme
I habitually assume that Murphy’s accountancy qualification is a result of the low standard required .
Well Bongo, as the fellow said to the parrot: ” Merry Joker? Peck Me!”
“I habitually assume that Murphy’s accountancy qualification is a result of the low standard required .“
I’ve no idea what it is for accountancy but when I did my HND at the School of Signals the Army insisted on a 50% pass mark the get the promotion and appointment of FoS, even through the civilian qualification was 40%. Their argument was 40% pass meant 60% ignorance.
Dearieme
I’d like to think even he is not so stupid as to leave evidence freely available and he qualified in the era prior to the internet – but he does have a twin brother who could have sat the exams for him
And he has no understanding (or incorrect understanding) of a concept like depreciation and rejects GAAP as ‘neoliberal’ on the grounds he doesn’t understand it. Hence my conclusion he didn’t pass the exam legitimately. We’re he to seek legal redress it would prove he reads this blog.
BiND
“when I did my HND at the School of Signals the Army insisted on a 50% pass mark the get the promotion and appointment of FoS”
When I did the internal exams at HMIT (as was) back in the late 1980s en-route to becoming a Board on Inland Revenue appointed Tax Inspector the pass mark was 70%. They didn’t do re-sits. Fail the 1st year, they would offer you a clerical HMIT job, fail the second year and they would offer you a ‘non technical’ Inspector role.
To judge by the standard of HMRC staff today, this has been replaced by having to collect three packet tops from Frosties.