Labours first budget and likely outcomes

[alscar]

LeighW said:

The source was a lecturer on a tax update webinar I listened to this morning who is on various advisory boards at HMRC, she believes it's highly likely.

Did she have any other likely candidates for increases ?

[Saleen836]

When you live on benefits and have kids you could be eligible for a council tax reduction of up to 100%

https://www.gov.uk/apply-council-tax-reduction

[Zaichik]

SpidersWeb said:

If I wanted some tax income,.......
4. Pension changes - reduce the tax relief to the basic rate, but leave the Annual Allowance and Lifetime Allowance alone - lots of cash now, particularly with the fiscal drag of more people being drawn into the higher rates, and less ability to moan from the NHS staff hitting the limits.

really hope they don't destroy private pensions by removing tax relief on contributions - having had several years where I could not contribute more that 10k due to tapering, the next few where I can now contribute much more would be at risk if they do this.

For that matter, why would anyone contribute to a pension without full relief when the whole point is that you are taxed on the way out - that would mean a 40% tax payer would be asked to pay £120 for a £100 contribution - makes no sense.

[LeighW]

alscar said:

LeighW said:

The source was a lecturer on a tax update webinar I listened to this morning who is on various advisory boards at HMRC, she believes it's highly likely.

Did she have any other likely candidates for increases ?

Nothing immediate, possible reduction to annual pension contribution limits, quite likely to bring CGT rates in line with income tax rates from 25/26. IHT seems to be on the radar too.

[alscar]

LeighW said:

Nothing immediate, possible reduction to annual pension contribution limits, quite likely to bring CGT rates in line with income tax rates from 25/26. IHT seems to be on the radar too.

All the “usual” things then - I still think Council tax will be played with at some point too.

[Salted_Peanut]

LeighW said:

possible reduction to annual pension contribution limits

Zaichik said:

really hope they don't destroy private pensions by removing tax relief on contributions - having had several years where I could not contribute more that 10k due to tapering, the next few where I can now contribute much more would be at risk if they do this.

I doubt any government wants to destroy private pensions, but they could reduce the Annual Allowance or tax relief rate for higher earners.

Let’s hope they stick with leaving the Lifetime Allowance alone. The LTA brutality punished people who saved diligently.

[Slow.Patrol]

Might not be popular on PH, but a higher tier of VAT on luxury goods could be a way forward.

New cars
Silver/Gold jewellery
Perfume
Big TVs

In fact, most luxury stuff where people have an option not to buy.

As a non frequent flyer, I liked the Green's policy of allowing one flight per person a year untaxed. The following flights could then be taxed on a sliding scale.

In the UK, 15% of the population are responsible for 70% of the flights.

[NickZ24]

most countries have a lot to offer, even the countries in the Sahara do have plenty of sand.
It depend on how open-minded people are in government, that is exactly the point governments lack.

[borcy]

Slow.Patrol said:

In the UK, 15% of the population are responsible for 70% of the flights.

Interesting I didn't know that, I suppose it's reasonable to suggest the wealthier you are the more flights you'll take.

[Panamax]

Slow.Patrol said:

In the UK, 15% of the population are responsible for 70% of the flights.

Yes, and "climate activists" are no strangers to the jet aircraft. Always jetting around the world telling everybody else the shouldn't be flying.
Greta Thunberg
King "Chucky" Charles
Harry & Megs

[Zaichik]

Salted_Peanut said:

I doubt any government wants to destroy private pensions, but they could reduce the Annual Allowance or tax relief rate for higher earners.

Let’s hope they stick with leaving the Lifetime Allowance alone. The LTA brutality punished people who saved diligently.

Reducing the tax relief rate would pretty much kill private pensions - why would you contribute only to be taxed again on withdrawal - ie double taxation?

[Salted_Peanut]

For anyone curious about centre-left thinking, here's an excerpt from an influential think tank's report on long-term spending to support growth.

Fabian Society said:

the key drivers of growth, namely:
• Training, lifelong learning and active labour market policy.
• Public transport connectivity.
• Innovation – including diffusion and applied R&D.
• Digital communication infrastructure, such as ultra-fast broadband.
• Trade and inward investment policies.
• The business environment, business support and finance.
• Spatial and land-use strategy.
• Labour market regulation and enforcement

Details in full here: Going up a Gear: raising productivity by powering up investments, work and institutions

[alangla]

fat80b said:

I struggle to see how that might practically be implemented.

If it applied to "normal houses" all the way up, then you could quite easily see a nurse and a teacher in the south east paying significantly more than a nurse and a teacher in the north east. This feels like some horrible unintended consequences might happen.

Who decides what the value is - what if you have had building work done, what if you devalue your house etc. Do we end up with knocking down walls being a tax avoidance strategy.....

What happens to rental properties? We've got people bailing out of the landlord space as it is.

I would have thought that while the envy led approach of an LVT levied via some proxy of house prices might seem like a good idea in opposition, it might prove to be too hard to practically implement inside of government. (at least that's what I'm hoping)

Did people not used to brick up windows to reduce their property tax rate?

There’s definitely the potential for some nasty consequences depending on how property taxes are implemented, eg if it’s based on current value, then you could have an individual on a low income who buys a house in a cruddy area, that area is gentrified over time and the value of their home rises, is it fair that they are charged more?

Also elderly people who buy during their working life then retire, is it fair that they pay a significantly lower rate than their working age neighbours if we switch to an income based system?

There’s also the challenge of getting it implemented in the devolved administrations, AIUI, council tax is reserved (Salmond apparently planned to scrap it in Scotland, discovered he couldn’t, so froze the rate instead) but implementing something new will inevitably need co-operation across all administrations, both at council level and above.

I suspect this is one minefield that Labour might not cross until later in their term, if at all. It’ll certainly be more straightforward with a Labour administration at Holyrood after 2026

[Countdown]

Salted_Peanut said:

I doubt any government wants to destroy private pensions, but they could reduce the Annual Allowance or tax relief rate for higher earners.

Let’s hope they stick with leaving the Lifetime Allowance alone. The LTA brutality punished people who saved diligently.

A minor point but the LTA wasn't punishing "diligent savers". It restricted a tax break for those people who could afford to lock away £1m into their pensions or benefitted from high paying public sector roles with generous DB schemes. They could still save as much as they wanted (e.g. in a GIA or ISA or a normal savings account). They just wouldn't be able to reclaim the 40/45% tax, ( plus save on NI if they were doing salary sacrifice)

[Panamax]

Salted_Peanut said:

For anyone curious about centre-left thinking, here's an excerpt from an influential think tank's report on long-term spending to support growth.

Fabian Society said:

the key drivers of growth, namely:
• Training, lifelong learning and active labour market policy.
• Public transport connectivity.
• Innovation – including diffusion and applied R&D.
• Digital communication infrastructure, such as ultra-fast broadband.
• Trade and inward investment policies.
• The business environment, business support and finance.
• Spatial and land-use strategy.
• Labour market regulation and enforcement

All straightforward stuff, but what's the actual way forward from here?

[ooid]

Slow.Patrol said:

but a higher tier of VAT on luxury goods could be a way forward.

New cars
Silver/Gold jewellery
Perfume
Big TVs

In fact, most luxury stuff where people have an option not to buy.

.

Add cigarettes, Junk Food, and Unethically manufactured cheap fashion items overseas.

13% of people aged 18 years and over smoked cigarettes in UK
7% of people eat junk food everyday.
Just about 50% of people used BNPL at some point

Triple VAT on these rubbish, both NHS and benefits would also get a clear relief.

Leave people's earnings, savings, pensions and homes alone.

[Wombat3]

Zaichik said:

Salted_Peanut said:

I doubt any government wants to destroy private pensions, but they could reduce the Annual Allowance or tax relief rate for higher earners.

Let’s hope they stick with leaving the Lifetime Allowance alone. The LTA brutality punished people who saved diligently.

Reducing the tax relief rate would pretty much kill private pensions - why would you contribute only to be taxed again on withdrawal - ie double taxation?

If they are going to mess with pensions there are lots of things they could do that would not appear to hurt much today but have big impacts in the long run (just as Brown's Divi tax raid did).

Easy ones would be to reduce the amount of tax free cash you can have out of it (currently £250K ish), re-introduce an LTA but at a much higher level - say £2M or introduce some kind of taper on the tax relief available on contributions. None of which are going to hit people with even above average sized SIPPs

All effectively forcing people to invest more in taxable accounts/wrappers. Limiting the total you can contribute into an ISA would do the same - though that would seem very difficult to figure out & implement.

The other obvious one is the treatment of pensions WRT IHT.

There's plenty of scope to do it but there should be a bloody riot if they don't also do something about the gold-plated public sector schemes.

[mikeiow]

Countdown said:

Salted_Peanut said:

I doubt any government wants to destroy private pensions, but they could reduce the Annual Allowance or tax relief rate for higher earners.

Let’s hope they stick with leaving the Lifetime Allowance alone. The LTA brutality punished people who saved diligently.

A minor point but the LTA wasn't punishing "diligent savers". It restricted a tax break for those people who could afford to lock away £1m into their pensions or benefitted from high paying public sector roles with generous DB schemes. They could still save as much as they wanted (e.g. in a GIA or ISA or a normal savings account). They just wouldn't be able to reclaim the 40/45% tax, ( plus save on NI if they were doing salary sacrifice)

Indeed.
Just for another perspective…..
The LTA actually helped me make a decision to change the rest of my life…so instead of “brutally punishing me”, it got me to move on from the world of tech to a world of my own choices.

Of course I firmly agree that it caused a huge amount of unneeded pain to many industries, especially the medical profession, and Labour need to ensure they avoid unintended consequences through random changes.
Luckily my job didn’t directly save lives, so I am but minor collateral damage to the world of work!

[2Btoo]

ooid said:

Add cigarettes, Junk Food, and Unethically manufactured cheap fashion items overseas.

13% of people aged 18 years and over smoked cigarettes in UK
7% of people eat junk food everyday.
Just about 50% of people used BNPL at some point

Triple VAT on these rubbish, both NHS and benefits would also get a clear relief.

Leave people's earnings, savings, pensions and homes alone.

Amen, brother. I'll back any and all of those.

(BNPL = Buy Now Pay Later, non?)

[E63eeeeee...]

ooid said:

Slow.Patrol said:

but a higher tier of VAT on luxury goods could be a way forward.

New cars
Silver/Gold jewellery
Perfume
Big TVs

In fact, most luxury stuff where people have an option not to buy.

.

Add cigarettes, Junk Food, and Unethically manufactured cheap fashion items overseas.

13% of people aged 18 years and over smoked cigarettes in UK
7% of people eat junk food everyday.
Just about 50% of people used BNPL at some point

Triple VAT on these rubbish, both NHS and benefits would also get a clear relief.

Leave people's earnings, savings, pensions and homes alone.

So we move more of the tax burden on to poor people, and leave the wealthy people alone? We could call it the Reverse Robin Hood approach.