Tax rises?

[willendure]

Time to get the calculator out and work out if inside is now better than outside at the current market rates.

I'm assuming the salary sacrifice NI level is calculated based on PAYE salary. It would exclude income from dividends, so anyone operating an efficient div/salary split will pay 8% on salary contributions until they hit a combination of pension/salary of £50k.

I can't see Salary sacrifice being taxed, and employer pension contributions not being. This could be interesting for those with employer-matched contributions if they are aligned.

Yeah, thats sort of what I am wondering. Maybe it will likely work like this:

You pay X into your SIPP out of after tax earnings, dividend or PAYE does not matter. Now you owe (X - £2000) * 8% in NICs. HMRC is also going to give you back 20% to 40% to make the SIPP contribution tax free. Subtract the NICs from that.

Your Ltd pays X into your SIPP, it was previously a fully deductable expense incuring no tax. Now it will attract NICs at the rate of (X - £2000) * 8%.

So the NIC contribution will be same it doesn't matter if its a personal payment after tax, or "salary sacrifice" or a company contribution to a directors SIPP or whatever. If the actual mechanism of payment into the SIPP can make a difference, naturally we will choose the one that is most tax efficient, wouldn't we? Which is why making it the same no matter what way it is done makes sense.

But honestly, what the hell do I know about it, will have to just wait and see.

I have jammed quite a bit into my SIPP in recent years but am wary of overdoing it, because once the money is in, their are rules about how and when you can get it out, which means that it is sort of a sitting duck if the tax man wants some. Its a good deal, but I think cannot be the complete answer to saving for retirement.

[Protagoras]

I have jammed quite a bit into my SIPP in recent years but am wary of overdoing it, because once the money is in, their are rules about how and when you can get it out, which means that it is sort of a sitting duck if the tax man wants some. It's a good deal, but I think cannot be the complete answer to saving for retirement.

Just so. Plus, one of the big impacts of the so-called fiscal drag on personal allowances is that it's harder to get the money out without paying higher rate tax (leading to reduced disposable income and spending).

But of course when working in pseudo-employment via a brolly, it's attractive to make pension contributions rather than pay employer's NI and at least it's been possible to date to get 25% of the pension out tax-free. It's no wonder that the level of 25% withdrawals has been so high recently given the level of uncertainty around the budget.

I don't think I've ever seen a budget subject to so much ex ante discussion. The general population can't make informed decisions given the level of uncertainty.

[sadkingbilly]

The general population can't make informed decisions .

yep, that's why Nigel's nasties are doing so well.

[BlueSharp]

Yeah, thats sort of what I am wondering. Maybe it will likely work like this:

You pay X into your SIPP out of after tax earnings, dividend or PAYE does not matter. Now you owe (X - £2000) * 8% in NICs. HMRC is also going to give you back 20% to 40% to make the SIPP contribution tax free. Subtract the NICs from that.

Your Ltd pays X into your SIPP, it was previously a fully deductable expense incuring no tax. Now it will attract NICs at the rate of (X - £2000) * 8%.

So the NIC contribution will be same it doesn't matter if its a personal payment after tax, or "salary sacrifice" or a company contribution to a directors SIPP or whatever. If the actual mechanism of payment into the SIPP can make a difference, naturally we will choose the one that is most tax efficient, wouldn't we? Which is why making it the same no matter what way it is done makes sense.

But honestly, what the hell do I know about it, will have to just wait and see.

I have jammed quite a bit into my SIPP in recent years but am wary of overdoing it, because once the money is in, their are rules about how and when you can get it out, which means that it is sort of a sitting duck if the tax man wants some. Its a good deal, but I think cannot be the complete answer to saving for retirement.

I suspect that will be the change pension contributions via salary sacrifice/employer contribution will be subject to employee NICs with an increase in either the NIC threashold to take prevent the avg Joe on under 50k from loosing out.

[jamesbrown]

naturally we will choose the one that is most tax efficient, wouldn't we?

This isn't really a choice you have in most cases. They are mostly not building policy around outside IR35 contractors, although it may sometimes feel that way. SS is a massive cost to the Treasury for regular employees.

[Protagoras]

yep, that's why Nigel's nasties are doing so well.

I've got to admit one aspect of their proposition caught my eye, that's the branding of manifesto policies as "Our contract with you".

Now of course we all know that there can be no real contract, but given the tendency of main parties to 'neglect' what was said at election time, I do think the branding of Reform's message will influence a lot of people.

[malvolio]

I've got to admit one aspect of their proposition caught my eye, that's the branding of manifesto policies as "Our contract with you".

Now of course we all know that there can be no real contract, but given the tendency of main parties to 'neglect' what was said at election time, I do think the branding of Reform's message will influence a lot of people.

I don't think anyone other than journalists takes any notice of what passes as a manifesto these days. Not even the clowns that write them.

Most parties get elected on the basis of how their leader appears on the telly. Policies are a long way over the horizon.

[woody1]

I don't think I've ever seen a budget subject to so much ex ante discussion. The general population can't make informed decisions given the level of uncertainty.

Unlike last year when it was mainly employers (& farmers) that got hit, this year much more of the general population are likely to be impacted, so it's not surprising there's so much speculation as to who/what they're gonna screw.

[Protagoras]

And now this ….

https://www.theguardian.com/uk-news/...ates-in-budget

[BlueSharp]

Hidden in the detail is no change to rates but there could be a change to the thresholds.


Drop the income tax threshold
Increase Employee threshold for a a working person for a net zero change
Bring Employer pension contributions/salary sacrifice in scope of Emp NI and Income tax

Net result is private pensioners and private pension are now taxable.