Labour and tax

[Iwishicouldflyhigh]

Is anyone else concerned about all the talk about Labour getting in and then increasing lots of taxes - capital gains, CT, tax on pensions etc. I'm accepting that they are going to get in, but i am genuinely concerned that they are going to clobber the middle classes.

I don't think that KS is a bad person (actually - with a few exceptions - i think that most politicians at least START in politics with the correct intentions), but i 'm worried that his genuine ideals are far more left then he is making out. The rich will be all right (they always are), but the middle classes (of which i am one) - i'm genuinely worried. He supported JC for God's sake!!

I think that people are genuinely so pissed off (rightfully) with the Tories, that they are voting in Labour with the idea that they can't be any worse. But i'm concerned that they might be (for different reasons).

Can any party really fix the issues in this country?

Please talk me down, someone!

Its quite impressive that when the average income is £35k in this country that the average tax paid is up by £13k (nearly 40%). It must mean that the higer earners and companies are paying much more tax...as the average earner is not paying 2/3rd of their income in tax! Lies, damned lies and statistics I think is the expression...

I wonder whether breakfasts for school kids is a good use of tax payers money? I don't mean to sound crude but if you can have a shag, get knocked up and carry a baby for 9 months , then keep it alive until its school age , why can't you feed it weetabix and make it to school for 8.45?

You’d like to think so @MgW1 but some parents don’t or can’t for whatever reason.

Maybe the money would be better spent on those underlying reasons (health, MH and addiction being big ones) but they’re not easy fixes and in the meantimes kids are hungry 😕

I believe its for all children not those that are disadvantaged but I may be wrong? I'm all for helping out if parents are going through a difficult time I.e a free place at the school breakfast club each week but to offer to all kids seems a waste of money ? I may have read it wrong , it's hard to keep up.

The state pension is £11.5k a yr right now it will surpass the tax free allowance soon. So yes if you only rely on state pension your state pension will soon be taxed. Right now it isn't. People only pay tax their pension when their private pension takes them over the tax free amount. So it'd the private pension that gets taxed really.

Tories have committed to ensure the pedal tax free allowance will rise to e sure the state pension never goes over it.

Labour have refused to say the same therefore safe to say that when the stage pension breaches the tax free allowance it will be taxed. And that in itself is wrong because you paid NI tax on your warnings to recieve this benefit. To then be taxed again is a double tax!

Of course tax for everyone will go up! where else is KS getting all this extra money?

The state pension is £11.5k a yr right now it will surpass the tax free allowance soon.

To surpass it requires it to go up by £1000 a year. If we assume the triple lock means a 5% increase then it will take 3 years to surpass it. If the triple lock calculates a lower rate (because infaltion is down) it'll take longer. If it calculates a higher rate, it'll be sooner.

The personal allowance is frozen - for everyone - until 2028.

All Labour have done is refuse to copy the Tories Triple Lock Plus. Of course they have - it's an election and they can't go around going 'oh, that's a nice idea, we'll half inch it'. FWIW none of the other parties have matched the triple lock plus either. Plus, it's likely not to be an issue for another 2+ years anyway - which gives them time to consider it. It does not need deciding now as a knee jerk reaction to another party's pledge.

That does not automatically mean they won't do something similar. Or that they won't leave it as it is and then raise the Personal Allowance for all to keep it ahead of the state pension. Or something else. Or maybe they won't and state pensioners will have to pay their £7 a month in tax (assuming a £1500pa rise in state pension).

I just happen to think the phrase 'Labour is going to tax pensioners' has dumbed down the whole scenario to such as extent that it is misleading. In some cases, deliberately so.

Where are any of them?

They all have black holes in their manifestos so I genuinely have no idea why Labour (the one the IFS quoted as having the smallest gap between spending and saving) is the one targetted as being 'uncosted'. Not least because Labour is the only party who seems to have a dedicated section in their manifesto to explain their financial workings.

The reality is - if ANY party wants to deliver everything in their 2024 manifesto, then incomes need to be raised to pay for it. Regardless of who wins, they will all face the reality of delivering everything and raising taxes - or not delivering, so that taxes can stay as they are.

What we do know is that the tax burden has become higher over the last 14 years than it has been for decades. Whilst Conservative governments 'of old' have tended to reduce taxes, this lot have gone against that and blown them out of the water.

I heard that figure on Have I got News for You from Ian Hislop. In all honesty I didn’t fact check it but I trust that it wouldn’t have got through their legal advisors if it wasn’t true.

Well I think it's only fair to point out the pandemic which needed paying back hasn't helped let put it into the context that this hasn't happened in other cycles before which has delayed any evident able tax drips although they have started too. Nor to mention the labour parry said there was o money left after they went on huge spending spree.

What it does show though is that tories are traditionally the party of lower taxes, labour come along spend spend spend and then we have to pay it all back again.

At some point we have to payback what we borrow.

Looking at the graph on twitter it's actually a household number not an individual number, and is a cumulative number from 2019. It's also all taxes on not just individual/household, so is a meaningless number at a household level. But, as its obvious household taxes haven't gone up nearly £4k per year - or by a third - then companies/the higher paid are paying more. Which is what it feels like...indeed, corporation tax receipts alone increased £17 billion in 2023 - almost 20%

But the following is entertaining at a tit for tat level!!

Both parties are in fantasy land - but Sunak's tax attack on Labour is rich given what his government has cost voters | Politics News | Sky News

I disagree.

If you look at the numbers, there is more of a balance between both parties:

Tories have had 4 stints in power. In 2 of them, they left the tax burden lower than they started. In 1 they left it exactly the same as at the beginning and in one they increased the tax burden - this latest stint (and that's ignoring the pandemic years).

Labour have had 3 stints in power and have seen an increase in 2 of those and a decrease in 1.

Perhaps most telling are the two recent stints. Again, discounting the pandemic years, the Tories average tax burden is 33.2 - compared to the latest Labour government which had an average of 32.7. The Tories increased the tax burden by 0.8, compared to Labour's increase of 0.7.

This view of fiscal attitudes in the parties is an old one and recent decades do not follow it.

And whilst we're being fair it's probably also fair to point out the note about here being no money left is an age on old joke that multiple CoE have left their counterparts in the new government - includinng old Conservativbes leaving it for incoming Labour - and the MP who "weaponised" it has since apologised for doing so.

History has a habit of repeating itself!

@TheDarkMonarch

I just happen to think the phrase 'Labour is going to tax pensioners' has dumbed down the whole scenario to such as extent that it is misleading.

I think it's more likely that they will (and should) increase tax on the pensioners with higher than average incomes. I.e. find ways of equalising the tax paid on different kinds of incomes. Maybe by adding NIC to rental income, pension income, investment income etc? Or by reducing the tax free element of occupational pension lump sums. It's insane that a pensioner with an income of £50k pays less tax than a worker on a gross wage of £50k. Same with CGT - illogical that the rates of CGT are so much lower than income tax rates. So, when people say pensioners are likely to pay more tax, they don't mean the basic state pension, they mean all the other types of income/gains that richer pensioners are currently benefitting from lower rates of tax. I'd be very surprised if tax rises don't happen on occupational pensions or capital gains or rental property income!

I do think inheritance tax is dreadful.

I suspect the personal allowance will be kept in line with the basic state pension, whether for all or just for pensioners, purely as there is no current mechanism for collecting tax on state pension as it’s not paid through paye so it would either have to be operated through paye or all pensioners would have to complete tax returns. Having to change a whole system to collect very small amounts of tax isn’t cost effective it would probably end up costing more than was collected.

My State Pension, is already over the threshold, on its own, because of some sort of SERPS thing from my late husband.

They tax me through my private pensions, because I have no allowance left over and above my state pension. In fact, I’m over the threshold, so have some sort of deficit tax code.

It would help everyone if they raised the threshold, but looking at the cabinet, the whole government looks very Blairite, so I don’t think anyone is going to get very much help.

We’ll see.

if a person has a private pension as well then the state pension can be taxed through that. If your state pension is more than the personal allowance you get a k code which means an amount is added to your private pension in calculating what the tax is, you basically have the tax on the state pension deducted from your private pension. Where it wouldn’t work is of a person had state pension only then this isn’t paye so there is no mechanism to collect the tax. There are some people like yourself whose state pension is higher then personal allowance so hmrc either collect through paye from your private pension or the person has to do a tax return if they don’t have paye income but the numbers of people this effects are reasonably low. However as time moves on more people will move to new state pension which is a fixed amount, it wouldn’t make sense to have the personal allowance lower than new state pension figure due to the sheer numbers of people without private pensions it would effect and the tax would have to be collected somehow

Kier wouldnt commit to raising the personal bracket he was asked in every debate

HMRC have what they call "simplified assessment" for exactly that scenario to avoid the recipient having to complete a SA return. HMRC are told the state pension for everyone, so can easily raise a "simplified assessment" for those whose pension exceeds the personal allowance if they don't have an occupational pension and don't have other income to tax via the SA return (i.e. interest, dividends, property rental etc). The system is already there, so not such a leap to just use it for more people. Lots of pensioners already have a state pension that exceeds the personal allowance by virtue of the state "add ons" i.e. for widowers, or those with benefits under SERPS/S2P etc.

Usually though for simplified assessments the additional tax due then gets coded into the persons paye code for the subsequent year. If someone has state pension only and no other pension/employment income they won’t have a paye code and the only alternative is to raise a bill and the person have to physically pay the money across. It works when it only affects a relatively small amount of people, so they’ll be people at the minute in receipt of state pension that’s is above personal allowance due to serps. However to do this on mass across the whole pensioner population so that even the amount received as basic through new state pension will be taxed makes no sense, it will cost more to collect the tax than the tax raises. That’s why tax on small amounts of interest were scrapped as it costs more to collect than it raises

It's not completely insane or illogical that a pensioner on £50k pays les tax than someone earning £50k. Part of the pensioner's £50k income comes from the (notional) 12 or 13% NI that they paid while working to build entitlement to the £11k of state pension, that then forms part of the £50k income for the pensioner. If you then 'tax' that as well, it's the equivalent of someone with a private/company pension be expected to continue to contribute to their pension post retirement. Which is nonsensical. Which is why those over retirement age don't pay NI, and why the Tories cut NI not income tax, so that those in work benefitted but the retired did not. Now, that creates an opportunity to tax pensioners and those that work the same, but it also makes it harder to link years worked/paying in to the level of state pension you receive - so we probably end up paying everyone a full state pension

Why? Too low? Too high? Too easy to avoid? Cause you don’t want to pay it?

IHT is a good thing. It should be much lower but with no exemptions - 10%~ish and then people would put much less effort into avoid it.

Thing is that people can "earn" a full state pension without actually paying any NIC or paying very little (i.e. low earners, benefit claimants, carers, etc). So there really isn't a link between actually paying NIC and the state pension anymore. Of course, go back into history, and people bought a "stamp" for their "cards" to earn state pension entitlement, but that's all stopped. Likewise, for a couple of decades there was earnings related elements of state pension (SERPS and S2P) but that's stopped now too. So really, without any kind of link between actually paying NIC (nor the amount of NIC paid), and state pension entitlement, you're argument fails. NIC has become (for the last 20 years or so), just another tax on workers' incomes.

I agree. Going from a 0% rate to 40% is crazy. It should be graduated like income tax or capital gains tax, starting, as you say, at around 10%, with maybe a higher rate of 20% for larger estates. You're quite correct, take away the incentive to avoid it, and The Treasury will get more revenue rather than tax consultants and lawyers specialising in IHT avoidance schemes!