Higher rate tax relief on pensions to be abolished?

[Fred Bloggs]

Absolutely. Probably making the individual who receives the company pension contribution (whether by sacrifice or not) responsible for a tax top-up on his SA, in the same way as now a HRT individual pensions investor reclaims the difference between HRT and BRT on the SA return.

I really hope thay leave CT relief alone. Without that it has then removed just about the only remaining reason to be running your own Co as a Ltd Co contrator. It would be a nail in the coffin for sure.

[expat]

I really hope thay leave CT relief alone. Without that it has then removed just about the only remaining reason to be running your own Co as a Ltd Co contrator. It would be a nail in the coffin for sure.

The complication is that as things stand, company pension contributions are straighforwardly gross, in a sense they do not so much attract CT relief, as simply not come into it. For this reason they are still tax-free if your contract is in IR35. If you took company pension contributions out of the area of CT-free costs, and into CT-liable, then they would naturally come into the income side of the deemed payment calculation, and so risk attracting income tax as well as CT. That would certainly eliminate their attractiveness.

[centurian]

I cannot think of what I will do if this happens. Paying straight into a SIPP is the only worthwhile way for me to save money for my retirement (if any), when I am sure not to be paying HRT but not certain of having to pay BRT!

Being caught in IR35 for my "day job", I also pay into a SIPP as the figures do come down more on the side of pensions that the CT route.

If HRT is removed then I will stop paying in anymore and use alternative investments.

What winds me up is the view the widely held belief that Higher Rate taxpayers are receiving money from the government. Some of the quote state that removing HRT will "save the treasury $2billion" - as if they're simply giving us money.

FFS, it's our money to begin with - we simply don't get taxed on the portion that we invest for our retirement (at least until we take it out). We're not being given the relief - it just gets paid into the pot gross.

At my age, with current interest rates, an ISA is of no interest. What use is it to bill £1000, pay ERs and then £887 salary, get £523 net salary, put it in an ISA, and over 10 years at 4% have it rise (tax free!) to perhaps £784, which will be taxed BRT on payout so effectively worth £628?

Why would you get taxed on an ISA on payout

I thought that everything that went in - and stayed in was tax free.

If/when you take it out, then you only pay tax on any interest that the pot subsequently earns once it's out.

[ASB]

Absolutely. Probably making the individual who receives the company pension contribution (whether by sacrifice or not) responsible for a tax top-up on his SA, in the same way as now a HRT individual pensions investor reclaims the difference between HRT and BRT on the SA return.

I'm not sure about the difference and the reclaim. As a HRT and contributor to pension (prior to salary sacrifice) I got my SA return and spoke to the tax office and they said "it depends how the contributions are made". I **think** the reclaim only occurs if it is private pension paying the contributions personally. In my case I checked the numbers carefully and discovered that the X that was my contribution was simply removed from my gross pay and handed over (company scheme).

It was very confusing, but my employer contribution was X% of gross salary and mine was Y. Thats what got handed over.

This might make it a bit more difficult to carry through, since rather than not giving extra relief I think anybody contributing to a company scheme would actually need to be charged extra tax through a code adjustment.

[Cyberman]

Being caught in IR35 for my "day job", I also pay into a SIPP as the figures do come down more on the side of pensions that the CT route.

If HRT is removed then I will stop paying in anymore and use alternative investments.

What winds me up is the view the widely held belief that Higher Rate taxpayers are receiving money from the government. Some of the quote state that removing HRT will "save the treasury $2billion" - as if they're simply giving us money.

FFS, it's our money to begin with - we simply don't get taxed on the portion that we invest for our retirement (at least until we take it out). We're not being given the relief - it just gets paid into the pot gross.

What these ignorant people also ignore is that you pay tax on your pension when you draw on it 30 years or so down the road, so in no way is it 'free' money. A good pension also serves to ensure that HMG has less to pay out in benefits to pensioners.

[IR35 Avoider]

I think (hope) this is just a scare story dreamed up by certain pension providers to drum up business.

To be logically consistent and fair, if higher rate relief on personal contributions is banned, then company contributions should be treated as a taxable benefit on which higher-rate tax is still to be paid, and defined benefit pension accruals (like what MP's and civil servants get) should likewise bring a tax bill with them, for those who fall into the higher rate bracket.

Of course, they may decide against being logically consistent and fair.

[expat]

Why would you get taxed on an ISA on payout

I thought that everything that went in - and stayed in was tax free.

If/when you take it out, then you only pay tax on any interest that the pot subsequently earns once it's out.

Sorry. Blunder. It's not quite as bad as I figured.