Labour's October Budget

[Andy_W]

Most posters appear to be happy to take on a greater tax-burden - but ONLY if the more wealthy are taking on an equivalent burden.

The main thrust of the original post was that the noises coming from Labour HQ appear to be that (a) we need to increase tax on PAYE income, because it's easy, and (b) we aren't going to go after the truly wealthy, because it's difficult.

All whilst cutting payments to the most vulnerable (winter fuel and child-cap).

I'm happy to wait until the actual budget is announced before picking it to pieces, but there is enough in the public domain from both Reeves and Starmer to make the current extrapolation believable.

The problem is a lot of the super rich don't get paid via PAYE, it's paid via dividends, trusts, shares and expensive (but cost effective) tax avoidance schemes, as well as they divert a load of wages into their private pension. Then there's the uber rich who a lot make a noise saying they would all leave, and they control the press/ narrative. Of course, they all wouldn't leave, not even most, but some would, and I think the top 10% pay 60% of all tax? They need to sort out this tax dodging and tax avoidance. The rates wouldn't need to be higher if people actually paid them.

The middle to upper class will get targeted the most, as they're the easiest to go after, and with a quick ROI etc.

Hopefully they can support the least well off pensioners, but we can't pretend that the richest generations all need that winter fuel allowance, or even need a state pension at all. For me that needs to be means tested, and I say that from a point of view where it would mean I likely get zero in the future.

 

[Andy_W]

The 22bn black hole exists, there's a letter about it here, and the IFS has effectively said Labour shouldn't have expected that to be coming. This was first known to Labour about 10 weeks after being elected.

Jeremy Hunt is where the fingers should be pointed at.

 

[Scrote]

That was the main thrust of the post
Amazing what people can extrapolate from what he actually said…

From The BBC Report
‘He did not set out the details of what would be in the Budget but said those with the "broadest shoulders should bear the heavier burden".’

That's one quote. Reeves, especially, has been quite consistent in her output around taxing (or not) wealth.

Starmer has made various statements both prior to and after the election. The fact we don't yet have a clear indication of where Labour will sit, politically, on this is, for me at least, a worrying sign.

The problem is a lot of the super rich don't get paid via PAYE, it's paid via dividends, trusts, shares and expensive (but cost effective) tax avoidance schemes, as well as they divert a load of wages into their private pension.

The middle to upper class will get targeted the most, as they're the easiest to go after, and with a quick ROI etc.

Yes, that's exactly the point I was making, and why I think some posters are coming across in the way @Laughing suggested. I don't think it's hypocrisy or selfishness but just an awareness that they are going to be targeted for tax rises when higher 'earners' aren't.

Hopefully they can support the least well off pensioners, but we can't pretend that the richest generations all need that winter fuel allowance, or even need a state pension at all. For me that needs to be means tested, and I say that from a point of view where it would mean I likely get zero in the future.

I'm not comfortable with changing the rules on pension rights after the fact, as there's nothing a pensioner can do to change their situation. Just because some pensioners are on a good deal doesn't mean we should now penalise them. It's highly likely that they would have acted differently whilst earning/saving if the rules had been different. You're basically just telling the current generation that social-welfare isn't to be trusted - guess where votes will end up going...

 

[sherlock]

I can't see any party being foolish enough to means test the state pension, it would be political suicide.

 

[Corcaigh_the_Cat]

I can't see any party being foolish enough to means test the state pension, it would be political suicide.

There's no need to. It forms part of a person's earnings, once those earnings (state pension + personal pension + company pension + dividends etc) reach a certain level they're taxed. So the wealthier could be paying back their state pension in full annually.

 

[1finny]

That's one quote. Reeves, especially, has been quite consistent in her output around taxing (or not) wealth.

I’m not sure that’s the case - wealth taxes that have been widely discussed in and around the party:
VAT on private Schools
Tackling some non dom loopholes
Hi earners bonus to be taxed the same as income (currently CGT)
Inheritance tax to include pensions
40% tax relief on pensions to be lowered
Profits on 2nd home sales to increase

 

[Andy_W]

I can't see any party being foolish enough to means test the state pension, it would be political suicide.

That shouldn't be a reason not to do it though, there should be a cross party agreement that the UK needs to do it. There won't be of course though, as old people vote, and loads vote Tory (as they're now well off). Labour are going to have to do it on their own one day, or do something similar like removing the tax free lump sums, or tax relief on inputs.

It has to be done sooner or later as the population is too top heavy, and becoming more top heavy by the day and will do for another 30 years or whatever, which is already baked in. The Triple lock during a time which has been ridiculous for the worst off who won't see a pension for 30-40 years has been ludicrous.

If they came out and said anyone with a 400k private pension pot or 600k net worth or couples at 30% more than those values combined), or something like had more than 40k per year until their expected life expectancy then how many would be against that? The only people in that are the pretty well off. Then just don't ever put those limits up, and let inflation eat them away, which is basically what they're already doing my not increasing the different tax thresholds. We've already had auto enrolment for private pensions for over a decade.

30k a year for a single pensioner, or 40k per couple is enough for what is defined as the "moderate" lifestyle.

 

[Nano]

There's no need to. It forms part of a person's earnings, once those earnings (state pension + personal pension + company pension + dividends etc) reach a certain level they're taxed. So the wealthier could be paying back their state pension in full annually.

NI and Income Tax being separate is unnecessary and it is one way that pensioners pay less tax than workers. The most logical thing would be to charge NI on pension income. Or combine income tax and NI into a single tax.

 

[Trug]

Huh

I agree with this completely, and I am guilty in parts too.

I have no problem with paying my share now that I am doing well - but I can't help but feel aggrieved at the way the tax system treats single income families. If my incomeut could be taxed as household income (which is how it is spent), rather than individual income then I would be much happier.

As it is I am a willing participant, who doesn't hesitate to grumble about it

But you pay taxes as an individual but if you need to claim benefits your household income is taken into account

 

[Andy_W]

There's no need to. It forms part of a person's earnings, once those earnings (state pension + personal pension + company pension + dividends etc) reach a certain level they're taxed. So the wealthier could be paying back their state pension in full annually.

The first 10k is free anyway, which pretty much matches the pension so the only thing being taxed is private pensions, and they're extremely tax efficient.

But letting someone dodge 40% tax, to then get that back with a 25% tax free lump is OTT, then the rest is a top up.

Very very basic example
Higher rate payer doges 40% tax and ends up with a 400k pension, which they might expect to last 15 years of their life....

100k tax free, so call that 7k per year (but if they invest it, this will go up)
10k state pension
30k private pension, taxed at 20%, so call that 6k
-------------------------------------
Total income 47k per year, total tax 6k
Effective tax rate 13%, for someone who avoided paying 40%.

*300k would probs last ~15 years, taking 30k per year, as what you're not withdrawing is still invested etc, but this is a basic assumption and changes with crashes/ booms etc

 

[Matt]

Huh
But you pay taxes as an individual but if you need to claim benefits your household income is taken into account

Not for childcare or child benefit it isn't

Once one parent hits a certain level of earnings, those benefits either start to taper or are removed completely

Previously you could have a single income of £60k receiving no child benefit or child care allowance, and another household where both parents earn £49k and they'd get the full amount (whilst also receiving 2 x personal allowance and neither paying more than 20% income tax)

I do believe that for child benefit at least the bands have changed now to be higher, but there is still a significant amount of difference between the take home pay of a family with one larger income and another family with two smaller incomes that when combined equal the pay of the single income. Plus the double income family will be getting child benefit and child care allowances.

 

[Colgates_shaving_foam]

That's one quote. Reeves, especially, has been quite consistent in her output around taxing (or not) wealth.

Starmer has made various statements both prior to and after the election. The fact we don't yet have a clear indication of where Labour will sit, politically, on this is, for me at least, a worrying sign.


Yes, that's exactly the point I was making, and why I think some posters are coming across in the way @Laughing suggested. I don't think it's hypocrisy or selfishness but just an awareness that they are going to be targeted for tax rises when higher 'earners' aren't.


I'm not comfortable with changing the rules on pension rights after the fact, as there's nothing a pensioner can do to change their situation. Just because some pensioners are on a good deal doesn't mean we should now penalise them. It's highly likely that they would have acted differently whilst earning/saving if the rules had been different. You're basically just telling the current generation that social-welfare isn't to be trusted - guess where votes will end up going...

I agree, if the state pension ends up getting means tested I would think people would just spend more on holidays and buying stuff whilst working. They would, perhaps rightly, think what is the point of saving the extra into a private pension.

 

[Matt]

Not for childcare or child benefit it isn't

Once one parent hits a certain level of earnings, those benefits either start to taper or are removed completely

Previously you could have a single income of £60k receiving no child benefit or child care allowance, and another household where both parents earn £49k and they'd get the full amount (whilst also receiving 2 x personal allowance and neither paying more than 20% income tax)

I do believe that for child benefit at least the bands have changed now to be higher, but there is still a significant amount of difference between the take home pay of a family with one larger income and another family with two smaller incomes that when combined equal the pay of the single income. Plus the double income family will be getting child benefit and child care allowances.

And just to add:

I believe we are one of few countries that do this. In Germany/France for example the tax liability of a family where each earn £40k would be the same as a family where one spouse earns £80k, and it would be the lower of those 2 figures.

 

[Nano]

And just to add:

I believe we are one of few countries that do this. In Germany/France for example the tax liability of a family where each earn £40k would be the same as a family where one spouse earns £80k, and it would be the lower of those 2 figures.

I think one of the reasons they don't do this is because it would massively increase the number of people having to file self-assessment. PAYE is a simple solution and it costs very little to administer. Other countries do it though as you mentioned. Seems to be that what is cheapest for the government takes precedence over what is right or what is best for people.

For specific benefits it really is simple and I don't know why they don't just accept both parent's incomes be taken into account. You apply and put your details in the same way so answer a question based on two people's circumstances instead of one isn't more difficult.

 

[Andy_W]

if the state pension ends up getting means tested I would think people would just spend more on holidays and buying stuff whilst working. They would, perhaps rightly, think what is the point of saving the extra into a private pension.

I'm more on about means testing the state pension first.

But yeah, the tax breaks on private pensions need to be reduced, it's too tax efficient.

I wouldn't say it's saving extra into the private pension, as the middle to low earners will still need to chuck in, and it's still could be lucrative to do that, just not as lucrative. Plus, loads of peoples pensions get matched by employer too, so they would be daft to not do it.

If the rich decide to spend, rather than hoard, this would be better for the economy, which should in theory help the least well off.

 

[Andy_W]

I think one of the reasons they don't do this is because it would massively increase the number of people having to file self-assessment. PAYE is a simple solution and it costs very little to administer. Other countries do it though as you mentioned. Seems to be that what is cheapest for the government takes precedence over what is right or what is best for people.

For specific benefits it really is simple and I don't know why they don't just accept both parent's incomes be taken into account. You apply and put your details in the same way so answer a question based on two people's circumstances instead of one isn't more difficult.

Higher earners need to do a SA anyway don't they (so they single higher earner likely already would be), if they're benefitting from the 40% pension relief, as they don't automatically get that back unless the SA to get it, they only get 20% automatically?

Loads of people don't realise they actually need to do this though, to get full relief.

 

[Scrote]

I think one of the reasons they don't do this is because it would massively increase the number of people having to file self-assessment. PAYE is a simple solution and it costs very little to administer. Other countries do it though as you mentioned. Seems to be that what is cheapest for the government takes precedence over what is right or what is best for people.

For specific benefits it really is simple and I don't know why they don't just accept both parent's incomes be taken into account. You apply and put your details in the same way so answer a question based on two people's circumstances instead of one isn't more difficult.

There's the additional problem of governments using tax as a form of social manipulation (Cameron's "Nudge Unit").

Family incomes are taxed less because they want people to be coupled up and producing 2.4 children. If they did something that encouraged singledom they'd end up with an even bigger housing crisis because, lets be honest, most people are unbearable

 

[Soutra]

The first 10k is free anyway, which pretty much matches the pension so the only thing being taxed is private pensions, and they're extremely tax efficient.

But letting someone dodge 40% tax, to then get that back with a 25% tax free lump is OTT, then the rest is a top up.

Very very basic example
Higher rate payer doges 40% tax and ends up with a 400k pension, which they might expect to last 15 years of their life....

100k tax free, so call that 7k per year (but if they invest it, this will go up)
10k state pension
30k private pension, taxed at 20%, so call that 6k
-------------------------------------
Total income 47k per year, total tax 6k
Effective tax rate 13%, for someone who avoided paying 40%.

*300k would probs last ~15 years, taking 30k per year, as what you're not withdrawing is still invested etc, but this is a basic assumption and changes with crashes/ booms etc

How do you get a £30k pa private pension from a pension fund of £300k, assuming you aren't 80?

 

[Andy_W]

How do you get a £30k pa private pension from a pension fund of £300k, assuming you aren't 80?

30k draw down per year from 300k would last about 14-15 years under average market conditions, so from like 70-85 etc.

Like I said, it was a very basic example.

 

[Millbrook]

So, the Royal Family, Jacob Rees Mogg, The Marquis’s of Bath who are wealthy only because of inheritance are not privileged?
It’s a view.
It’s not one I share.

You are correct when my comment is taken as broad as that and I agree with you. My recollection is that I was responding to average folk receiving inheritance.

Reflecting further I think the examples you give are privileged more by the class system than by wealth itself. For the normal folk who cop a juicy inheritance I prefer the description fortunate rather than privileged.