Non-motoring > Tax rise Miscellaneous
Thread Author: sooty123 Replies: 33

 Tax rise - sooty123
www.bbc.co.uk/news/uk-politics-58476632

Seems taxes are to rise to pay for Health and social care. Seems to me this will become a rod for this and future govs backs. Not sure why they feel the need to have a seperate tax just put it on income tax.
 Tax rise - PeterS
Income tax and NI should have been merged years ago; this pretence that NI is somehow different is delusional. It all goes into one pot
 Tax rise - martin aston
I benefitted from not paying NI from age 58 when I retired on my company pension. Not, as many pundits seem to assume, when I drew my state pension. This seems hardly fair. I don’t see why I shouldn’t pay NI on my pension income (over and above a tax/NI free threshold). There was an interesting stat a year or so back that, on average, those pensioners who have enough income to pay tax have larger incomes than the average working wage. So why exempt people like me from NI?
As Peter says merge them then we all pay. It would also address the fact that there is a ceiling on NI so in percentage terms it falls heaviest on the lower paid. Meanwhile I, and millions like me, escape this tax raid (or necessary fund raising) unscathed.
Provision might need to be made at the margins for pensioners at the lower end but compared to the burden falling totally on working people alone it surely wouldn’t be impossible to finesse.
 Tax rise - PeterS
The burden of NI from an employee perspective falls very much on the poor. It tapers off at something like £50k anyway I think, and salary sacrificing into a pensions (an choice only for the moderately or well off) avoids much of it anyway. And as you say, the retired pay none at all. One of the more regressive taxes.
 Tax rise - sooty123
When the PM made his statement, he did say why they didn't increase income tax. The reason he gave was employers pay NI as well and so they should pay their share too, which is true I suppose and to raise a similar amount from income tax it would to be increased by a lot more than 1.25%. I'm not sure those reasons outweigh creating a new tax, certainly as others have already said NI is a strange one.
 Tax rise - sooty123
>> I benefitted from not paying NI from age 58 when I retired on my company
>> pension. Not, as many pundits seem to assume, when I drew my state pension.

What's the cut off for not paying NI?
 Tax rise - Bromptonaut
>> What's the cut off for not paying NI?

NI is generally levied on earnings so doesn't catch occupational pensions. Like Mr Aston I've benefitted from not paying NI on my pension over the last seven years. I do though pay NI on my CAB salary; sufficient to ensure my state pension is covered.

NI levied on earnings applies at the rate of 12% on earnings from £184 to £967/week (approx £50,300pa). The higher figure is called the Upper Earnings Limit. The NI rate above that is 2%.

taxaid.org.uk/guides/information/an-introduction-to-income-tax-national-insurance-and-tax-credits/national-insurance/national-insurance-for-employees-and-employers/national-insurance-thresholds
 Tax rise - martin aston
Thanks Brompton. I didn’t realise the NI position until I was 50 and my company put us oldies through a pre-retirement session. Until then I had just assumed that I would pay NI after retirement. I am sure that until today a large percentage of the population assumed this too.
 Tax rise - sooty123
Cheers I didn't realise it was linked to pension payment, I guess like many others I thought it was linked to SPA.
 Tax rise - Manatee
>> on average, those pensioners who have enough income to pay tax have
>> larger incomes than the average working wage. So why exempt people like me from NI?

Averages may well not be a great way to analyse that. I take the view that they have netted it off the state pension, which as we know is one of the lowest around. I suspect though that it will come, initially at a low rate. Currently it is 12% for employees between about £10k-£50k p.a. so if a pensioner is on an average sort of gross income of £30k then they can potentially look forward to about £2.5k deduction for N.I., even though such contributions will presumably not accrue extra pension as they do for workers.

But NI is regressive once people are in the net. It drops for employees to 2% above £50kp.a. It also only applies to earned income. So really big earners, especially those whose income is substantially 'unearned', are barely touched by it.

It's time we got to grips with the large minority of comparatively very wealthy people. The Laffer curve doesn't mean that government shouldn't be looking or can't look at the enormous amounts of personal wealth hoarded by UK residents.

>> As Peter says merge them then we all pay. It would also address the fact
>> that there is a ceiling on NI so in percentage terms it falls heaviest on
>> the lower paid.

Quite

>>Meanwhile I, and millions like me, escape this tax raid (or necessary
>> fund raising) unscathed.

Not really. You will still have to pay up to £86,000 towards your care . I'd willingly pay my 12% if care support was free as it should be. If you get cancer, they don't tell you that you must pay for the treatment yourself, but if you get Alzheimer's they want your money or your house.

I think they will chip away at it anyway. Starting perhaps with a lower rate of NI on earned income.

TBH if I don't just fall off my perch as I expect, I'll do everything in my power to get live-in care. I'd be amazed if that can't be done for much less than £1500 a week especially if I provide the accommodation.
 Tax rise - Zero
I stopped paying NI for ever in 2010 at the age of 56, so will have contributed to my health and care for less than 50% of my life. I'm not moaning, by any means, but its hardly contributing my share.

I'll need to see about mitigating the raid on my gelt to pay for my care home tho....
Last edited by: Zero on Tue 7 Sep 21 at 17:28
 Tax rise - sooty123
www.bbc.co.uk/news/business-58476547


Seems the triple lock has been stopped for a year.
 Tax rise - Zero
>> www.bbc.co.uk/news/business-58476547
>>
>>
>> Seems the triple lock has been stopped for a year.

Fair enough, the wage rise figure was an anomaly.
 Tax rise - sooty123
>> Fair enough, the wage rise figure was an anomaly.

Agreed.
Last edited by: VxFan on Tue 7 Sep 21 at 20:27
 Tax rise - Bromptonaut
>> Fair enough, the wage rise figure was an anomaly.

Agree. Either a double lock (RPI v 2.5%) or some work is needed on a wage formula that irons out pandemic related creases.
 Tax rise - Manatee
>> >> Fair enough, the wage rise figure was an anomaly.
>>
>> Agree. Either a double lock (RPI v 2.5%) or some work is needed on a
>> wage formula that irons out pandemic related creases.

Yes, but what? What provision is there to ensure that pensions grow at least as fast as earnings over a period say 2019-2022? It's not the actual level of wages relevant to the next rise that is the issue it's the depressed level of the prior year. The triple lock was consciously designed to raise pensions - using the best of 3 is bound to beat all 3 conditions over time. The idea was clearly to move gradually to a decent level of state pension.

The right thing to do would have been to establish the underlying increase in wages.

Still it was expected, and they'll get so much flak anyway that they needn't care about this - they hope. Pensioners vote, mostly Conservative, and there are a lot of them.
 Tax rise - sooty123
www.bbc.co.uk/news/health-58442991

Bit more on the care cap.
 Tax rise - Bromptonaut
>> www.bbc.co.uk/news/health-58442991
>>
>> Bit more on the care cap.

Smoke and mirrors.
 Tax rise - Manatee

>> Smoke and mirrors.

Worse than I thought. It will make little practical difference to most it seems. Certainly not enough to make me keen to "volunteer" to pay NI.

Didn't Johnson say at the last election that they had a plan to deal with care costs? Was this it? Looks like a con-trick for refilling the general coffers.
 Tax rise - PeterS
There are a few useful points of substance to the care cap, and surely it’s better to do something rather than nothing to tackle the growing problem. I think that relaxing the means test so that it tapers between £20k and £100k of assets will help, and as importantly reduce the worry, for many people. Addressing the current situation where those paying privately pay far more than the local authority rate for exactly the same care is also a positive.

I did have to laugh at Mr Starmers objection that the NI changes were putting the “primary burden” on people and businesses though. I mean, who else is there to foot the bill…?
 Tax rise - Terry
A separate pot for extra NI is just smoke and mirrors - a tactic that has worked for Boris in the past. That extra tax is needed to cover extra costs is undeniable - presentation is important.

The rationale for the separation of NI and basic tax is weak - a historical legacy going back to the days of a physical "stamp" which qualified individuals for certain state benefits (pension). There is no logic for sparing pensioners with sufficient income from the burden of NI when those younger with the same income pay it.

Provision of some state funded services are generally regarded as socially desirable - eg: NHS, social care, education, state pensions, safety net. They ensure all individuals can access basic human needs irrespective of personal circumstances.

Other state spending is a consequence of political and economic policy - eg: defence, environment, international aid, transport, etc. These are provided for the benfit of society as a whole and are not a consequence of individual circumstance.

A rather simplistic separation, but one which could be used define "tax" vs "national insurance". All who live here benefit from the latter, only those who have contributed should benefit from the former.
 Tax rise - Manatee
There is no logic for sparing pensioners with sufficient income from the
>> burden of NI when those younger with the same income pay it.

You state that as a fact. It isn't. Pensioners have paid their NI, that's why.

Pensioners with lots of income have usually foregone spending earlier in their lives to pu themselves in that position, pay lots of income tax, and don't claim pension credit and housing benefit

You're turning the state pension into a means tested benefit (in my opinion).

 Tax rise - Bromptonaut
>> You state that as a fact. It isn't. Pensioners have paid their NI, that's why.

There's no 'pot' there with your or my name on it; the reality is that benefits are all pay as you go. I'd accept that the State Pension shouldn't be subject to NI but it's harder to justify treating the wages of those over pension age differently.

The Guardian is reporting that once payroll processes have been updated the 1.25% increase will be deducted separately as a “health and care levy”. Working Pensioners will pay that levy.

I suspect it may also be applied to occupational pensions.

>> Pensioners with lots of income have usually foregone spending earlier in their lives to pu
>> themselves in that position, pay lots of income tax, and don't claim pension credit and
>> housing benefit

They might also have had the benefit of tax reliefs at high marginal rates on the pensions, mortgages and life insurance that mean they're outside Pension Credit and (for renters) Housing Benefit.


>> You're turning the state pension into a means tested benefit (in my opinion).

Not sure I follow how.
 Tax rise - Manatee
We know there isn't a pot, pooled or segregated. It's a contract.

I don't disagree per se with applying NI to wages for those working and above state pension age.

As to tax relief on pensions...we got tax relief when we put the money in, and we pay tax when we get the proceeds back. Excepting of course the TFLS which is the key incentive in my view.
Last edited by: Manatee on Wed 8 Sep 21 at 13:54
 Tax rise - No FM2R
There should be no expectation on a personal level of any relationship between what is paid in and what is received.

Those are two entirely different subjects and calculations and at different times one will be impacted by them differently.

 Tax rise - Manatee
>> There should be no expectation on a personal level of any relationship between what is
>> paid in and what is received.

The amount of your state pension is linked to your contribution record. Well, mine is.
 Tax rise - PeterS
>> >> There should be no expectation on a personal level of any relationship between what
>> is
>> >> paid in and what is received.
>>
>> The amount of your state pension is linked to your contribution record. Well, mine is.
>>

It’s not linked in any normal sense though, is it? It’s based on years that you’ve contributed. Not how much. In my case I need 30 years contributions for a full state pension (in 17 years time…). But in those years I could have contributed £1 or £100,000 a year in NI. My state pension would be the same. And although I have 30 years of contribution, I still need to pay NI for which I’ll get no additional state pension. NI is just another tax.
 Tax rise - Manatee
I have 43 years IIRC but I don't receive the full new state pension because of a period of contracting out, when I paid at a lower rate. That is partly offset because I also accrued some Second State Pension.

It might be difficult to follow, impossible probably, but there is a link when they want there to be one.

The link of course becomes tenuous when they use it as a milk cow.

Bottom line is they can do what they want if they make an appropriate law for it. So why haven't they put at least a proportionate burden on their super-rich friends? That is actually what is making me cross, along with the fact that that it hasn't solved the problem.

They clobbered the poorest in society after the banking crisis and they haven't changed their spots.
 Tax rise - PeterS

>>
>> Bottom line is they can do what they want if they make an appropriate law
>> for it. So why haven't they put at least a proportionate burden on their super-rich
>> friends? That is actually what is making me cross, along with the fact that that
>> it hasn't solved the problem.
>>
>> They clobbered the poorest in society after the banking crisis and they haven't changed their
>> spots.
>>

The NI increase applies to employers contributions too, so businesses are also carrying some of the burden. And dividend tax is also increasing by the same amount, so those with assets, including pensions, that pay in dividends also carry some of the burden. Maybe that should be higher… Dividends paid by FTSE 100 companies are around £80 billion a year I think. Total dividends will be higher, though by how much I don’t know. But I reckon that there could be £1.2 to £1.5 billion of tax take there?
 Tax rise - James Loveless
"Seems the triple lock has been stopped for a year."

Does anyone really believe that? I bet an excuse will be found to prolong the suspension beyond twelve months... or indefinitely... or permanently.

Cynical, moi?
 Tax rise - Bromptonaut
>> Does anyone really believe that? I bet an excuse will be found to prolong the
>> suspension beyond twelve months... or indefinitely... or permanently.
>>
>> Cynical, moi?

There is good rationale, ignoring the opportunity to use it as a windfall to raise our diabolically low pension, for not using it this year. The windfall/catch up thing applies in spades to the UC uplift though; restoring parity between SSP and other working age income replacement benefits.

Will be interesting to see if there are backbench rebellions on either issue.

There were already rumblings before COVID that the triple lock had outstayed its welcome.
Last edited by: Bromptonaut on Wed 8 Sep 21 at 16:14
 Tax rise - Manatee
>> I benefitted from not paying NI from age 58 when I retired on my company
>> pension. Not, as many pundits seem to assume, when I drew my state pension. This
>> seems hardly fair. I don’t see why I shouldn’t pay NI on my pension income
>> (over and above a tax/NI free threshold).


Had you had a job after you retired you would as I understand it have been liable for NI, subject to the limits, on your earned income. You only cease to be liable for NI after state pension age. NI just isn't a pensions tax. Not does it apply on the unearned income that many seriously rich people live on.

Have a clear conscience. Your pension presumably derives from your employment when you paid the NI.

Still, it's very generous of you. Nothing to stop you donating it to a worthy cause, I'm sure you could spend it more wisely than the government. In fact I doubt if it's possible to spend it less wisely than they have on test and trace, and PPE contracts.
 Tax rise - martin aston
I am not a saint and I have made use of tax breaks and ISAs over the years to reduce my tax.
As for the NI that I paid that covered the then current pensioners, not my own pension. That is paid for by people working now. So far so equitable. However now the workers are going to bail out the NHS and people like me are not. I may well also benefit from the new provisions on care without chipping in.
I do support worthy causes. Currently that includes my daughter, her partner and baby who have little spare cash as it is but will face several hundred pounds of additional NI costs.
We will see how it pans out and maybe the comfortable boomers like me will be hit in the next budget. Then I can rant at the unfairness of that. Such is life.
 Tax rise - Terry
I try to look at the world as it actually is, not how I personally feel it should be.

90% of people have an income less than £56k pa. Where this income is from work it approximates to the level at which NI stops. But if the income is derived from pensions or investments then no NI will be payable. This seems anomalous.

NI is simply another tax and most pensioners pay no NI. Where the burden of tax falls is a political and social judgement, as is the choice of which services are funded through taxation vs private provision.

The argument that "we paid in so we should get our share out" is flawed - it would perversely lead to a conclusion (for instance) that the elderly should not benefit from medical advances and drugs development they have not contributed to (IMHO undesirable).

Tax raised has always been for current expenditure, not saved to fund future commitments.

There are wealth differentials. The top decile (10%) has an average wealth of £2.4m - of which £0.8m is property and £1.1m pension wealth. The top 10% of income earners pay 61% of total income tax raised. Including NI, VAT, council tax, fuel duties etc is complex - the wealthy probably pay more, but possibly a lesser proportion of their total income.

Some see the very wealthy as an easy target to fund tax increases. This is just an illusion - if you have £10m or more you:

(a) can pay for lawyers and accountants to reduce your tax bill,
(b) move overseas,
(c) are unlikely be concerned about bills of a few £k a week should you need private care

In conclusion - most agree the care system does not work well and the NHS needs extra "catch up funding". The debate is really about who pays. The proposition that we should make the wealthy pay does not bear objective scrutiny.

The reality is that the problem affects all of us:

- those on low incomes will pay little or nothing, and get care provision for free
- most of us will pay something and we will mostly all benefit

The very wealthy can either avoid payment or pay for private care - as they already do for education, healthcare, anyway.
Latest Forum Posts