If Labour raises taxes what will you think?

[functioningagain]

Typing on my phone so not sure I can do a poll? But, if the government raises income tax or NI at the budget, will you think:

A - let’s get real, they had no other choice
B - those duplicitous / inept bastards

@taxguru

Neither of my parents receive pension credits to offset against tax.

But today's young workers are paying for their own pension AND their parent's pension, so having to pay twice.

The parents of today’s young workers paid higher taxes in addition to NI when they were working.

When today’s young workers become parents, the tax and NI they pay will be used to pay for their children’s education, healthcare and pensions.

I couldn't put it better myself. Well said.

You have it the wrong way for pensions. Today’s pensioners paid for their parents’ state pensions. Workers today pay for the current pensioners. And babies being born now will pay for the pensions of the current young adults. So long as the system doesn’t collapse before then….

Not just our parents’ pensions but our grandparents’ too.

@RoostingHens

Workers today pay for the current pensioners

They don’t.

My state pension will be based on the number of full years of NI I have paid in, not what others have paid.

Go on www.gov.uk and you can check your NI contributions record.

But the money to actually pay what you will be entitled to will come from the workers / tax payers when you retire. Your contributions are not ring fenced in a little pot with your name on

A! Most definitely A, we're a nation of cheapskates. We need to realise that if we want decent infrastructure and services we need to pay for them. The wealthiest also need to pay their fair share, tax avoidance loop holes closed etc. We also need to stop seeing housing as an asset, but as a human right. If people didn't pay such overly inflated prices for housing we'd have more money for everything else. Houses as assets is a sickness in our society!

your maths is completely off.

pensioner £36,860 - £12,570 =£24,290. 20% Income tax on that is £4,858

Worker £37,430 - £12,570 =£24,860.00. 20% Income tax on that is £4,972 + class 1 National Insurance of £1,967.68. Giving a total of £6,959.68

Incidentally a worker on £36,860 pays £6,800.06

This is incorrect. There is no state pension pot, state pensions are paid out of direct taxation.

It should be

B and I knew they would.

@PinkFruitbat

pensioner £36,860 - £12,570 =£24,290. 20% Income tax on that is £4,858

The pensioner who receives state pension will not be entitled to the full basic allowance of 12570. It will be reduced by the amount of state pension they receive.

So, if they receive the full pension of £230.25 (about £12K per year), their allowance is:

12570-12000 =570

Taxable income is £37430 - £570 = £36,860.00

Tax on £36860 at 20% = £7372

This is more than the tax and NI combined for a worker on £37430 as they are entitled to the full basic allowance of £12570.

@PinkFruitbat

This is incorrect. There is no state pension pot, state pensions are paid out of direct taxation.

Look at www.gov.uk

It reads.

If you reach State Pension age on or after 6 April 2016

What it is
New State Pension
The new State Pension is a regular payment you can get from the government if you reach State Pension age on or after 6 April 2016. The amount you get depends on your National Insurance contributions and credits. The full new State Pension is £230.25 per week.

Take note of the wording highlighted in bold.

pensioners get the same personal allowance. Any income above that is taxable income (a bit of state pension, private pension, rental property income) and you will receive income tax but not national insurance.

Your understanding of the personal allowance, and income tax, is wrong.

The amount you get depends on the NI you have paid. But that NI doesn’t actually go towards funding your pension, it pays towards funding the pensions of people already in retirement. As their contributions went towards funding the generation ahead of them, and your children’s contributions will go towards funding yours,

@LaserPumpkin

As their contributions went towards funding the generation ahead of them, and your children’s contributions will go towards funding yours.

Correct. It used to be known as SERPS, State enrolled pension scheme. People paid into the system when they were working and took out of the system when they reached state retirement age. So, there is no double payment by young people as alleged on this thread.

If someone died before they reached retirement, the money they had paid into the system remained in the system. Partners, next of kin, etc., did not receive anything.

The mistake governments made was not to increase the state retirement age and increase the NI to be paid by both employers and employees to reflect greater life expectancy. For example, my grandmother took state pension from age 60 to 98. A period of 38 years. More years than she worked in total.

People aren't voluntarily paying more for housing - it's an essential, so they have no choice but to pay. You make it sound like they could simply "opt out" of paying too much! People have to live somewhere. That's even worse these days when the jobs are centralised in a few big cities and there are few jobs out in the regions, hence why graduates tend not to return to their home town after graduation, and thus have no choice but to pay over-inflated housing costs to live close enough to where the jobs are.

SERPS was extra on top of basic state pension, so you're wrong there.

It doesn't. It depends on how many qualifying years of NIC credits you've accrued. People earn the same "credit" for a year whether they earn £100k or £9k (or otherwise exempt). There is no longer any link between what you pay in NIC and your state pension (other than legacy extra pensions such as graduation, SERPS etc).

@taxguru

SERPS was extra on top of basic state pension, so you're wrong there.

Not wrong. The point was there is no double payment made by young people. The total amount of pension received is based on contributions. The greater the contributions, the larger the additional state pension you will receive.

I left my home town, Durham, in 1986 to work in Warwickshire, almost 200 miles away. I was able to buy a house as I had realistic expectations. I knew that paying a mortgage would not enable me to afford:

Cars
Holidays
Designer Clothes
Take aways
Drink large amounts of alcohol every weekend

Graduates were shafted by Tony Blair. The desire that 50% of the population should have a degree has made them worthless. All Blair wanted was to artificially reduce unemployment.

My daughter is doing a job she could have done at age sixteen. So, four years at University was a waste of time and money (mine).

@taxguru

It doesn't. It depends on how many qualifying years of NIC credits you've accrued. People earn the same "credit" for a year whether they earn £100k or £9k

Splitting hairs a bit. I would say the poster meant the time contributions were made as opposed to the actual monetary value.

For maximum pension, 35 qualifying years seems to be the most commonly listed figure. However, if you’ve not reached state retirement age by then you will have to continue paying NI even though you will not receive any more pension.

There are a lot of intended consequences to means testing the state pension.

I’m 54. I have 24 qualifying years. I need 35 years of NIC contributions to get the full state pension. So another 11 years of work. I am a high rate taxpayer. I have built up a nice defined contribution pension pot. Even so, I would like to have the full state pension as insurance against my pension pot being wiped out by a stock market crash, etc.

If the state pension becomes means tested, I might quit working earlier. I am tired and there is no incentive to keep working once the state pension that I have been working towards is taken away. If I keep working, I’ll contribute taxes and NICs each year of about. £24k. So about £264,000 to reach the goal of a full state pension. That is the same as 22 years worth of state pension payments.

Lets not disincentivise people from working or saving.

@Sibilantseamstress

Lets not disincentivise people from working or saving.

Perfect punchline.

It’s been said on BBC question time several times. Households receiving benefits should not have more income than households who are working and paying tax, National Insurance and council tax.

I am 60, but completed 35 qualifying years at age 57. I will reach state retirement age at 67. So, that’s 10 years I will have to pay National insurance for nothing in return.

Bit of a bummer considering that I am liable for £5K+ national insurance yearly. So, like yourself, I may wrap it up before I reach state retirement age.

If your NI is £5k+ you are earning £150k a year (or more). That should enable a good private pension and to retire earlier than 67?

NI still contributes towards the NHS. The elderly cost a lot of money to look after.

You are not paying in 10 years for nothing. As it stands when you retire in 2-3 years, you will still have access to the NHS, a bus pass, WFA and a pension that will pay until you die, state run care homes which are cheaper than private care homes and a host of other services and training for people that will assist you or that you will benefit from in some way as you age and or become less mobile/able. Teachers, retail assistants, bus drivers, care workers, cleaners, pension fund managers etc. They don't just appear on the planet fully formed, ready and able to work at the point you need them.

We have a pensions crisis looming, many people have not made any or enough provision and many others are unproductive. Add in poor leadership and corporate greed.

There is an argument for a nominal care tax on the elderly just for this alone.