Reply to: Tax Update 2026: simplification, modernisation and fairness

[willendure]

Similarly, adjusting the tax code doesn't sound like a simple way to deal with the issue.

Also, what does it matter ? Tax on self assessed income arrives 6 to 12 months after it was earned, but that is a pipeline in motion. Changing the rules might pull tax forward by 6 months, but its a one off, its not going to fundamentally change the tax base.

[jamesbrown]

It's just another example of over-complicating rather than simplifying. For example, consider people that have PAYE income that fluctuates or is much smaller than an amount that could be collected that way. Isn't that why you can only currently do this if the amount is less than £3k (i.e., opt for payment via your tax code in your SATR, rather than self-assessment)?

[Protagoras]

Anyhoo...

At what point is it ok for an employer to know about your income that is unrelated to your job?

It's unlikely to affect me but that's not going to stop me asking the question about whether an employee has a right to privacy about income that isn't related to their work.

My reading of this is that it is intended only to impact people who would make a PoA, i.e. those with income not declared until tax return submission. So someone with substantial interest income could be impacted by this, I suppose, or someone with a large capital gain? Or is this only covering employment incomes not declared in real-time?

I'd say that one's employer has zero right to know about income unrelated to what it's paying.
Such data could influence decision making. Examples might be selecting people for redundancy preferentially where they have other income, or not giving a pay rise where they know that this will take an employee over a tax threshold which might in turn make the employee go part-time.

It won't affect me, but I think it's a bad idea. I do understand that some people spend the money that should be put aside for paying tax, so providing this as an option might make sense.

Why not just advance the self-assessment deadline from January to the previous June?

My understanding is that for those in receipt of state pension and who are employed, PAYE tax not deducted from state pension is collected via tax code(s) issued to employer(s), so this may be an example of where this already happens in practice.

[WTFH]

At what point is it ok for an employer to know about your income that is unrelated to your job?

It's unlikely to affect me but that's not going to stop me asking the question about whether an employee has a right to privacy about income that isn't related to their work.

The flip side of that is that is that if you are a permanent employee of a company, they are expecting you to be giving them 37.5hr a week, Monday to Friday (or whatever the contract may specify) and if you are doing other work that prevents you from fulfilling that contract, they will want to know.
Many years ago there was a permie where I was working who was also a part-time DJ. The company had no issue with him doing sets on Saturday nights, but when he started taking Monday mornings off "sick", he was hauled up before HR for it.
But equally, if your tax code changes up or down by a couple of thousand, the company aren't going to care/notice.

[eek]

Anyhoo...

I filled in the survey for mandating direct debit for PAYE and VAT this morning. All a bit wishy washy but at least I've sent in my two bit's worth.

Apparently, having read an article on AccountingWEB, the consultation for Timely Payments in Income Tax Self Assessment is more insidious than it might first appear. If you have PAYE income, HMRC are looking to smooth out your self-assessed income via your tax code.

So, imagine having a job and you also have a rental property or maybe you like selling miniature figurines on eBay and do quite well such that you have sufficient income to declare it. HMRC propose that instead of you paying tax on that non-PAYE via self assessment twice a year, they will just tell your employer to use a different tax code. This means your employer is now collecting tax for something completely unrelated to the work you do for them. They might also be able to use that change in tax code to work out an estimate of how much extra income you get from your non work-related activities. They might choose to use that information to decide your pay rises, promotion or redundancy opportunities, etc.

At what point is it ok for an employer to know about your income that is unrelated to your job?

It's unlikely to affect me but that's not going to stop me asking the question about whether an employee has a right to privacy about income that isn't related to their work.

HMRC's logic will be that HR are not supposed to read anything into a tax code - as if that is the case in the real world...

[ladymuck]

Anyhoo...

I filled in the survey for mandating direct debit for PAYE and VAT this morning. All a bit wishy washy but at least I've sent in my two bit's worth.

Apparently, having read an article on AccountingWEB, the consultation for Timely Payments in Income Tax Self Assessment is more insidious than it might first appear. If you have PAYE income, HMRC are looking to smooth out your self-assessed income via your tax code.

So, imagine having a job and you also have a rental property or maybe you like selling miniature figurines on eBay and do quite well such that you have sufficient income to declare it. HMRC propose that instead of you paying tax on that non-PAYE via self assessment twice a year, they will just tell your employer to use a different tax code. This means your employer is now collecting tax for something completely unrelated to the work you do for them. They might also be able to use that change in tax code to work out an estimate of how much extra income you get from your non work-related activities. They might choose to use that information to decide your pay rises, promotion or redundancy opportunities, etc.

At what point is it ok for an employer to know about your income that is unrelated to your job?

It's unlikely to affect me but that's not going to stop me asking the question about whether an employee has a right to privacy about income that isn't related to their work.

[Smartie]

Right. But even Warren Buffet is on at least 40% cash right now.

Also worth noting that "the evidence is that your best returns come from being mostly in equities and staying invested" comes entirely from the period of time known as the great moderation, where interest rates have only fallen, and ignores the turbulent periods before that when interest rates were going up.

Buffet might be 40% in cash, but he's a huge fan of passive investing and historically cash makes poor returns. Also worth noting he had a really good start, which is documented here: https://monevator.com/how-did-warren-buffett-get-rich/

Also worth checking out:
60/40 portfolio issues https://monevator.com/the-60-40-portfolio-weakness/
Investing in bear markets https://monevator.com/bear-markets/

Pretty sure there's an article or two about timing the market there somewhere as well. Timing the market doesn't seem to be the best strategy, but best of luck with it :-)

[willendure]

If you're investing for the long term and still accumulating, the evidence is that your best returns come from being mostly in equities and staying invested. Almost everyone in cash will miss the week or two period where equities jump after a crash and several false starts for the next bull run.

Cash is useful, but 40% is a lot.
There are a variety of other diversifiers that can make up a balanced portfolio and defend against a variety of risks from recession to inflation.

Right. But even Warren Buffet is on at least 40% cash right now.

The other 60% is in those other diversifiers.

But my point is, its my choice, not Rachel Reeves. The governments agenda is not to make me better off, its to make the government better off.

If we just had a crash in equities I would be buying. And just keep dollar-cost-averaging for the long run. But right now is one of those rare times when everything is badly out of whack and you need to be very cautious with risk assets.

There is a deal. Possibly the best deal ever. Yet the straights of Hormuz are still closed. How long before the tank runs dry ? Would already have if China had not massively cut refinery output and dug into its huge reserves. But they cannot keep that up forever.

Also worth noting that "the evidence is that your best returns come from being mostly in equities and staying invested" comes entirely from the period of time known as the great moderation, where interest rates have only fallen, and ignores the turbulent periods before that when interest rates were going up.

[Smartie]

I just see zero point in buying equities at todays crazy prices. Buy low sell high remember ?

If you're investing for the long term and still accumulating, the evidence is that your best returns come from being mostly in equities and staying invested. Almost everyone in cash will miss the week or two period where equities jump after a crash and several false starts for the next bull run.

Cash is useful, but 40% is a lot.
There are a variety of other diversifiers that can make up a balanced portfolio and defend against a variety of risks from recession to inflation.

[willendure]

+1. And such instruments may carry a different risk profile to cash ...

Exactly. Remember the scandals in 2008 when supposed cash funds turned out not to be really cash and were taking a write down ?

I agree with James Brown, all they are doing is irritating people by treating us like we are stupid.

Will be glad to see Rachel Reeves go. She looks like a nanny - the nanny state !

[jamesbrown]

That's the thing - all this tax change does is to create a race to create instruments that look like cash investments but aren't subject to the tax.

The "cash-like" definition definitely covers money market funds, but only 100% investments in them So, as I understand it, you could have 99.9% in a MMF and 0.1% in, say, gold, and you'd be fine. This (among other reasons) is why the industry is pointing and laughing. It is such a classic over-complicated Treasury overreaction, which is also completely ineffective for anyone that can be bothered to circumvent it. You can see the future mapped out before us of aggressive tightening of the rules to achieve something that could have adequately been achieved by simply reducing the cash ISA limit. You will never sensibly micromanage the S&S investments, all you are doing is irritating tax payers (voters) with stupid rules about holding cash. Hopefully S&S providers will indeed scrap the paltry interest they offer on cash in their own accounts to simplify things a bit.

[Protagoras]

That's the thing - all this tax change does is to create a race to create instruments that look like cash investments but aren't subject to the tax.

+1. And such instruments may carry a different risk profile to cash ...

[eek]

The interest rate on cash held in S&S ISAs (and SIPPs) is generally crap anyway. Better to have it in a money market fund.

Better still (IMO), are ETFs like XSTR (inc) and CSH2 (acc) which track SONIA.

That's the thing - all this tax change does is to create a race to create instruments that look like cash investments but aren't subject to the tax.

[woody1]

The interest rate on cash held in S&S ISAs (and SIPPs) is generally crap anyway. Better to have it in a money market fund.

Better still (IMO), are ETFs like XSTR (inc) and CSH2 (acc) which track SONIA.

[Protagoras]

Government sought to incentivise saving, so introduced ISAs with no maximum cumulative holding limit. They were perhaps too popular and so government is now reigning back on these in an overcomplicated manner by way of simplification.

What next - maybe reduce the amount of premium bonds than can be held tax free? [Notwithstanding that like all cash instruments, Premium Bonds are subject to inflation tax].