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Inheritance tax hike inevitable Sunak warned as its ‘harder to rely on income tax’

Prime Minister Boris Johnson unveiled a £12billion a year tax hike last week in a move that proved divisive. Some Tory MPs joined the Labour Party in opposing the plans, which will see National Insurance increased by 1.25 percent, meaning taxpayers will pay around 10 percent more on top of their previous bills. Much of the revenue initially will be devoted to cutting waiting lists in the NHS, with social care receiving only £5.3billion of the £36billion expected to be raised over the next three years.

From 2023-24, once HMRC’s computer systems have been updated, the National Insurance contributions increase will be rebadged as a health and social care levy, which will appear as a separate line on payslips.

The move has been criticised by some because it targets income, rather than wealth.

But Ed Smith, head of asset allocation research at Rathbones, said it was inevitable that taxes on the wealthy would rise relative to taxes on income.

He told FT Adviser: “It’s a matter of arithmetic: if the retired/semi-retired population is growing faster than the in-work population, it gets harder and harder to make the numbers add up if you continue to rely on income tax as your main source of revenue.

“The classic argument against inheritance taxes is that they haven’t raised much money in the past, but the amount of wealth that is about to be transferred over the coming decades is unprecedented in the post-WW2 era.

“This shouldn’t be a question of debt sustainability today – debt is sustainable so long as GDP growth rates remain higher than the cost of servicing the national debt (as a percentage of GDP).

“But it is a question about debt sustainability further down the line, given rising old-age care costs and a shrinking income tax base.”

Some are not fans of wealth taxes however, including Gordon Andrews, tax and financial planning expert at Quilter, who argued a wealth tax hike wouldn’t work.

He said that wealthy people can avoid bills by using gifts.

Mr Andrews said: “Before the Government goes ahead and raises inheritance tax rates, it may want to think about who it is that pays the most tax in the first place.

READ MORE: Inheritance tax ‘should be abolished Sunak and Johnson told

“Analysis of inheritance tax rates paid by the Office of Tax Simplification shows the wealthy are able to pay less in inheritance tax due to being able to gift more away or have more intricate financial planning in place.”

Mr Andrews also argued that a rise in inheritance tax may also impact middle earners.

He continued: “While asset prices have risen, the tax take is still minute compared to other areas of personal finances, such as income tax.

“Inheritance tax brought in just £223million in 2019/20, so any further increases in rates are unlikely to make a huge difference to this.”

Inheritance tax is currently paid on anything above the £325,000 threshold – which was frozen until 2016 by Chancellor Rishi Sunak in March’s Budget.

A record amount of inheritance tax was raked in by the Government in 2020/2021’s tax year, and experts believe this trend will continue in the next few years.

Capital gains tax warning: Hike could lead to ‘triple tax’ on savers [INSIGHT]
State pension: Sunak and Johnson ‘right to suspend triple lock’ [ANALYSIS]
Johnson and Sunak told to abolish state pension lifetime allowance [INSIGHT]

It is an incredibly divisive levy in the UK, and an economist told last week that it should be abolished.

Julian Jessop of the free-market Institute of Economic Affairs said: “I’m not a fan of inheritance tax because it isn’t obvious to me why someone should have to pay more tax because they have died.

“People should be free to build up assets and pay tax on the assets as they are going along, that’s fine. There might be a case for taxing the capital gains on your first home as well as your second home.

“The idea you should pay a tax bill because you have died, I don’t really see any justification for that.

“My personal view is that it should be abolished, I just don’t see what it is about dying that means you should pay tax. It doesn’t make an awful lot of sense to me.”

Published at Sat, 18 Sep 2021 06:00:00 +0000

This story originally posted here

Not state pension age? Why withdrawing your pension could mean you miss out on extra cash

Accessing one’s pension early may seem like a potentially attractive option to boost finances in the short-term, especially during the uncertain economic times that are still ongoing as a result of the COVID-19 pandemic, but experts have warned that by drawing from one’s pension, people may be inadvertently hurting themselves by negatively impacting their ability to claim benefits such as Universal Credit.

New research from consultants LCP and EngageSmarter has found that large numbers of people aged 55 plus who access their pensions using the new ‘Pension Freedoms’ may be oblivious to the potentially devastating impact on their benefits.

A new research paper published today explains how getting pension freedoms wrong could cost people their benefit, whilst a new website tool has also been launched which allows savers to check whether this would affect them.

With imminent cuts to Universal Credit and the end of the furlough scheme, growing numbers of people may be considering accessing their pension for additional financial support, but this paper and website provide a warning that this could have a devastating effect on their benefits position.

Yet there is little awareness of this issue in the pensions industry and little to prevent savers making poor choices. Where people under state pension age take money out of a pension pot, this can affect their benefit entitlement in two main ways:

READ MORE: Pensioners to pay 12% National Insurance! New health and social care levy threat

If any of these takes money from a pension – perhaps because they are under financial pressure – this could have an adverse impact on their benefits. But tailored advice and guidance on what savers in this situation should do is not routinely offered by pension schemes, pension providers or official guidance bodies.

There is a real risk that members could unwittingly think they are improving their financial position by drawing on their pension but end up making themselves worse off.

In response, the report’s authors – Matt Gosden and Peter Robertson of EngageSmarter and Steve Webb of LCP – have designed a free website tool where savers who are on benefits and considering accessing their pension can get a feel for whether this is likely to impact on their benefits.

One of the authors, Peter Robertson commented on the findings of the research, stressing that the current guidance available is not enough to properly inform people needing advice, which could end up leaving them in financial difficulty as a result.

“The benefits system, particularly for those of working age, was never designed with this situation in mind. With millions of people starting to build up modest pension pots through automatic enrolment, this issue is only going to get bigger.

“It is unreasonable to expect individual savers to understand all of this complexity, so the industry and regulators need to work together to help people make the right choices.”

One of the factors that could cause Britons to consider accessing their pension is the scrapping of the temporary Universal Credit uplift, which will officially end on October 6, taking away over £1,000 from claimants each year.

The £20-per-week uplift had been introduced to help people through the worst of the COVID-19 pandemic, providing an additional £1,040 a year to those in need of supplementary income. However, this will be stripped away in a matter of weeks and is expected to push over half a million people into poverty.

A group of single mothers who are recipients of Universal Credit appeared in Parliament recently, calling for the Government to keep the uplift in place and warning that losing the extra cash will mean they will struggle to feed their children.

Published at Fri, 17 Sep 2021 23:01:00 +0000

Pension age is changing – ‘Real risk’ HMRC will ‘clobber’ Britons with 55% charges

The NMPA changes were announced back in July, as plans were published which proposed an increase from age 55 to 57 to take effect on April 6, 2028. However, by trying to protect some Britons from the age rise, the Government may be adding to the confusion, it’s been suggested.

Tom Selby, head of retirement policy at AJ Bell has criticised the Treasury’s handling of the situation. He said: “The Treasury has taken what should have been a simple reform and turned it into a hot mess of complexity. In attempting to provide ‘protection’ for some people from the proposed rise in the minimum pension access age to 57, policymakers will cause outlandish confusion for savers.

“Everywhere you look there are holes and problems in these proposals. Perhaps most worrying is the risk that, by creating a two-tier pension access system, the Government will inadvertently open the door to scammers. It is not too late to avoid this madness and we strongly urge the Treasury to step back from the brink.

“Furthermore, there is an alternative way forward which achieves the policy intention and is unbelievably simple – do away with the proposed protection regime and move everyone to a ‘Normal Minimum Pension Age’ of 57 in April 2028.”

Andrew Tully, technical director at Canada Life echoed the sentiments of Mr Selby and shared his bewilderment at how the new policy is being implemented. He said: “What should have been a simple process has turned into a hugely complex mess. If the Government believes there are genuine reasons to increase the NMPA to age 57 then that should apply to most people, although there is an argument for an exception for ‘uniformed’ pension schemes. This draft legislation gives wider protection, and on a completely random basis rather than being targeted at a specific cohort or age group.”

One of the stranger elements of the protections included within the changes is that even children can take advantage of the ability to secure a NMPA age of 55.

Mr Tully explained: “We even have the bizarre scenario that a child could take out a pension before 2023 (in a suitable scheme) and protect the ability to take benefits at age 55 in the 2070s. That is nonsensical. The NMPA should either be moved to 57 for all, with very limited exceptions, or the Government should retain age 55 and re-think its entire policy around minimum pension ages.”

An HM Treasury spokesperson said: “We believe it’s right to protect pension savers whose scheme rules provide them with an unqualified legal right to take pension benefits before age 57. That is why earlier in the year we set out the details of the framework and have been consulting on the technicalities to ensure it is as simple and fair as possible.”

READ MORE: Pensioners to pay 12% National Insurance! New health and social care levy threat

Published at Fri, 17 Sep 2021 06:25:00 +0000

Waspi women expect ‘substantial’ compensation. ‘Most of us have lost £50,000’

An estimated 3.8 million women born in the 1950s lost out when the State Pension age for women was increased from 60 to 65 to bring it in line with men, then 66. They are now awaiting the outcome of an Ombudsman ruling on compensation, and say it should reflect the financial and health struggles Waspi women have faced as a result.

Hilary Simpson, chair of the Women Against State Pension Injustice (Waspi) 2018 group, said millions of women were not given sufficient warning of the move to push back the State Pension age by up to six years.

Waspi women campaign enjoyed a massive boost in July, when the Parliamentary and Health Service Ombudsman said the Department for Work and Pensions (DWP) should have given women more notice of moves to raise their state retirement age.

The Ombudsman said Waspi women suffered “maladministration” because of delays in informing them of the change.

Campaigners are now pressing for a fair, fast, cross-party solution to the injustice.

Although the Ombudsman cannot refund lost pensions or pay damages, it can recommend the Government pays compensation.

Simpson is confident the Ombudsman will rule that Waspi women were victims of an injustice. “We expect any compensation to be substantial given the profound impact the lack of notice about the change to our pension age had for many women.”

She added: “We understand that the Ombudsman can’t recommend giving us back the State Pension we have lost, which is around £50,000 in most cases. But it must base its recommendations on the severity of the injustice women have suffered.”

READ MORE: Mum recalls ‘awful’ state pension age shock as she relies on savings

In July, the Ombudsman ruled that Waspi women should have been informed of any changes in December 2006, but delayed until April 2009.

Simpson said this delay made a huge difference for many of the women Waspi is fighting to help. “The Ombudsman has a mass of evidence from the women affected to inform his decisions about injustice and compensation.

“Many of us are now experiencing a reduced quality of life which it will need to take into account.”

The DWP has defended its position by saying the Government decided more than 25 years ago that it was going to make the State Pension age the same for men and women in a move towards gender equality.

Both the High Court and Court of Appeal have supported its actions, finding that the DWP acted entirely lawfully and did not discriminate on any grounds, the spokesperson added.

Published at Fri, 17 Sep 2021 05:30:00 +0000

Triple lock scrapping could lead to state pension fury and increase poverty.

As charities and organizations work together to help people make the best of retirement, this week marks pension awareness week. Numerous organizations have released research in conjunction with Pension Awareness Day. This highlights the ignorance of savers about pensions. For example, research from the Pensions and Lifetime Savings Association found that most people are still “in the dark” regarding pension basics. Over three quarters of respondents (78%) were unsure how much the state retirement pension costs. Recent weeks have seen controversy surrounding pensions, particularly after Boris Johnson’s government and Prime Minister suspended the triple lock.

Triple lock, as it was in the 2019 Conservative Party manifesto, stated that the state pension would increase only with inflation at the highest, or average earnings of 2.5 percent.

The Government claimed that the 8.3 percent distortion in earnings has resulted from the pandemic. This would have meant that younger taxpayers were forced to bear the burden of the increased costs.

While the Government claims that the measure will be in place for a year, former Shadow Chancellor John McDonnell stated recently that the removal of the triple lock could lead to poverty among those who rely on the state pension.

According to him, Rishi Sunak told the i newspaper that if he continues with the scrapping of the triple lock in this year’s fiscal year, it would be a betrayal for UK pensioners.

Since Margaret Thatcher’s reduction of the earnings link, UK pensioners have been fleeced for over four decades.

The triple lock received cross-party support as it started to correct a long-standing injustice.

It would be a betrayal to pensioners, and it could lead to more people in fuel poverty this winter.

As they lose the income boost, it is expected that the pensioners who have lost the triple lock on state pensions will end up PS13,000 less financially by age 85.

Helen Morrissey of Hargreaves Lansdown stockbroker said to the Telegraph that triple lock suspension would disappoint pensioners.

She stated that they would be able to get an additional PS14.90 per workweek if they had the state pension, and PS11.42 if the basic pension.

For those who have retired in 2016 and made 35 years of National Insurance Contributions, the state pension will be worth PS9 350.

READ MORE: Capital gains tax rate could be moved to 45 percent: ‘Possible! ”

This would have been PS10,126 by April 2022 if there had been an 8.3 percent increase. The pension will be PS9,584 if there is a 2.5percent increase. Telegraph analysis revealed that the difference in the accumulations amounts to a loss of PS12,986 over 19 years.

Ms Morrissey said: “Many would consider it unfair that pensioners receive a large increase while many workers are still dealing with the consequences of the pandemic.”

Julian Jessop (free-market Institute of Economic Affairs) recently stated that triple locking was not a viable policy.

He stated that he believed it was appropriate for them to modify the triple lock this year. However, while I don’t think they did it in the right way, I would still have maintained some link to the average earnings.

“I would use some underlying measure in order to be more consistent and coherent with the manifesto.

The pension is expected to reach a comparable place to inflation, which will likely be around three to four percent.


Sunak and Johnson have the ‘right’ to suspend Triple Lock on State Pension [INSIGHT]

Johnson and Sunak tell to eliminate state pension lifetime allowance [ANALYSIS]

Sunak warns families about inheritance tax and may make it necessary for them to “sell their homes” [INSIGHT]

Craig Berry is a Manchester Metropolitan University reader in Political Economy. He wrote last week for Guardian that the suspension of the triple lock might also prove to be bad for young people.

The argument that the Triple Lock is unfair to the youngest generation was a false presumption.

He said, “We should and can spend more on social insurance for both young and elderly.”

“It is more important to note that the triple lock will be in place for many decades when younger retirees reach retirement. This will allow them to receive pensions far higher than today’s retirees. It illustrates the power of compounding growth.

Publited Fri, 17 September 2021 at 12:18:00 +0000

Income tax map: Compare UK taxes with the rest of Europe, including France and Germany

All of this depends on your income at which the highest statutory personal income tax rates are applicable.

The thresholds are expressed as multiples of the average national wage. They range from zero in Hungary, Latvia, and the Czech Republic to 22.5 percent for Austria.

The Czech Republic, Hungary, and Latvia have a flat income tax that applies to all income.

Austria’s highest statutory rate, 55 percent, is only applicable to people earning over EUR1,000,000.

These are the figures for Europe’s rest:

  • France: 15.4 Percent
  • Portugal: 14.4 Percent
  • Greece: 11.1%
  • Turkey 8.6 percent
  • Lithuania: 6.3 Percent
  • Germany 5.4 percent
  • Slovenia: 4.7 percent
  • Luxembourg: 3.7 percent
  • UK: 3.6%
  • Switzerland: 3.5 percent
  • Slovakia: 3.3 percent
  • Italy: 2.8%
  • Spain: 2.4%
  • Finland: 1.9%
  • Poland: 1.7%
  • Norway: 1.6%
  • Ireland: 1.5%
  • The Netherlands: 1.3%
  • Iceland: 1.3%
  • Denmark: 1.3 percent
  • Sweden: 1.1%
  • Belgium: 1.1 percent
  • Estonia: 0.4 percent.

Publited Fri, 17 September 2021 at 07:39:00 +0000

National Insurance warns Britons that they are ‘unprepared for’ tax increases – Take action

Boris Johnson, Prime Minister of the United Kingdom, announced a 1.25 percent increase in National Insurance as part of efforts to finance social services and the NHS after the pandemic. As the UK recovers from COVID-19, however, this could not be the last of the government’s changes. Experts suggest that Capital Gains Tax and Inheritance Tax might be next in line of consideration. Barclays Wealth’s new research has shown that Britons are hesitant about these potential levies.

A poll of more than 2,000 adults revealed that a third felt unprepared for tax changes after a pandemic. Only 16% of respondents said that they had planned ahead and felt prepared to face any changes in levies.

Research also revealed that Britons worry about potential tax changes in the future to their wealth, retirement savings, and assets.

One quarter of Britons expressed concern about the potential impact on their Capital Gains Tax, and over one third stated that they worried about changes to their income taxes.

26% of Britons fear a new wealth-tax on the horizon. This could have a negative impact on financial planning.

Link” data-name=”‘Not even manifesto promises are off limits’ Sunak may hit retirees” href=”” target=”_blank”>’Not even manifesto promises are off limits’ Sunak may hit retirees

Anthony Ward, Head, Wealth Planning, Barclays Wealth commented on the subject and stated: “The findings show that many people across the UK don’t know how future tax changes will affect their investments, savings plans, and retirement plans.”

“As the UK struggles with growing national debt as a result of the pandemic,” further tax increases appear likely. Financial planning is more crucial than ever.

Ward shared some important financial planning rules that will help Britons navigate the tax hikes following the pandemic.

He said that it was important to know one’s financial goals. Asking questions about the person’s financial goals in 10 years is a good idea. This will help you understand how your vision might change over time.


Warning: Britons to be “worse-off” over the coming years – Act soon [INSIGHT]

“Universal Credit is too low!” Tory MP insists that PS20 must be maintained [VIDEO]

Link” data-name=”Britons could boost pension pot by over PS1,500 per year” href=”” target=”_blank”>Britons could boost pension pot by over PS1,500 per year [ANALYSIS]

It is important to also consider the impact of changes on income and spending over time.

Ward said, “By creating a vision of your future and how your wealth will be used, you can establish goals and determine how much capital is required to reach these goals.”

The expert recommended that one exhaust all tax allowances and shelter any excess returns in an Individual Savings Account. Britons have the opportunity to save as much as PS20,000 in this type of account for the next tax year (2021/22). This is a great example of how valuable it can be.

The third thing to consider is how one can increase the pension. Even though retirement may seem a distant possibility for many, planning ahead is a good idea to make sure you have a cushion financially in the future.

Contributions to workplace and personal pensions can be eligible for tax relief of up to 20%.

The taxman will apply a PS100 top-up to every PS80 that is paid in. This shows how important it is to invest into a pension.

Taxpayers who have a higher rate of tax can get back up to 20 percent or 25% through a Self Assessment return.

Ward encouraged people to write a will. He described it as an essential part of financial planning. He said that a will gives peace of mind to ensure the assets and property are left to their beneficiaries in case they die.

This type of action can also reduce an individual’s Inheritance tax liabilities. Many people who hate the idea of the tax levy will find legal solutions to get around it.

Tax diversification, Mr Ward considers one of his golden rules in financial planning. He explained the subject further.

Ward stated that you can choose whether your wealth has tax diversification or your tax risk is limited to a few products or structures. A self-invested personal retirement plan is tax efficient. However, you should not hold your entire portfolio in one structure or product.

Instead, tax diversification can be achieved by using different structures. This gives you flexibility and allows you to adjust to tax policy changes or unanticipated life events.

Publiated at Thu 16 Sep 2021, 23:01:00 +0000

Dec 2021: Universal Credit, State Pensions and PIP recipients will be eligible for a bonus

The website states: “If your state pension has not been claimed and you aren’t entitled to any of the qualifying benefits, you won’t get a Christmas bonus.”

Individuals will not have to do anything to claim or receive the Christmas Bonus. This type of payment should be received automatically.

If you believe that you should receive a Christmas bonus but haven’t received it, please contact the Jobcentre Plus office.

If you are a part of a married couple or a civil partner, and both of your qualifying benefits are received, each of you will receive a Christmas bonus.

Publiated at Thu 16 Sep 2021, 14:25:00 +0000

The PS300 increase in the state pension is possible next year, but there are half a billion to go

A high level of average earnings growth meant that the state pension would see an increase of over eight percent. The triple lock policy prompted the government to adjust for one year.

Pensioners still have the option to receive some cash starting next April. Next month’s inflation rate will reveal the official rate for state pension increases. However, at the current rate (3.2%), retired people could still get an additional PS5.75 per workweek.

With a maximum weekly value of PS179.60, the new state pension will eventually rise to PS185.35 with a 3.2 per cent increase. This would translate to a total annual cost of PS9.638.20. That’s up from PS9.339.20 per year.

The basic state pension is currently paid at PS137.60 per week or PS7.155.20 annually. An inflation rate of 3.2 percent would result in a PS4.40 weekly bump and an increase to the weekly payment of PS142. Pensioners could earn an additional PS228.20 over the year. The 52-week total would increase from PS7.155.20 and PS7.384.

READ MORE Pensioners will pay 12% National Insurance Threaten of a new health- and social care tax

Publited at Thu 16 Sep 2021, 08:30:00 +0000

What happens if inflation increases? What does this mean for you?

Although the consumer prices index was the most recent measure of inflation for August, it was higher than March 2012. However, the Office for National Statistics said that much of this effect is likely temporary. According to the ONS, this was the largest increase in CPI rates since 1997.

According to Reuters polling, the 3.2 percent rate was higher than expected at 2.9 percent.

Although the Bank of England anticipates that inflation will peak at 4 percent in 2019, it is expected to be temporary.

The push is largely due to higher travel costs and increased food prices. Food prices have increased significantly, even though they were artificially higher than August 2013, when the Eat Out to Help Out program was in operation.

Transportation costs are also rising. Petrol is now at 134.6p a litre, the highest since September 2013.

Prices of second-hand cars have risen to an alarming 18.4 percent in the last four months, due to the global shortage of semiconductor chip which has hampered the production of new vehicles.

Link” data-name=”European Central Bank just did something which hints they are worried” href=”” target=”_blank”>European Central Bank just did something which hints they are worried

While some inflation can be a good sign for the economy it will cause a drop in your living standards once it exceeds the pay rises or the interest rates on savings.

Chip’s Money Expert Tom Martin advises that you make changes in your work environment to take advantage of the high inflation rate.

Link” href=”” rel=”noreferrer nofollow” target=”_blank”> “It’s not all doom and gloom, if you’re in work, ask for a pay rise, or look for a better paying job, as the job market is on your side right now.

“Also in many cities, rents remain low compared to pre-pandemic, but they are rapidly rising as Britain returns to work.

It might be worthwhile to look at moving, however, house prices have risen due to pent-up demand after a year of lockdowns, and stamp-duty holidays.

Finally, it is important to look at how to combat inflation if your savings are kept high. This could be done by investing or getting higher interest rates.

Publiated at Wed 15 Sep 2021, 14:01:00 +0000