Jump to content
House Price Crash Forum
Catch22

Nu Labour To Subsidise The Rich By 51%

Recommended Posts

What a set of tossers, glad TB & GB never ever got my vote.

link to article

The Times

Well-off get bigger tax breaks for buy-to-lets

By Patrick Hosking, Investment Editor

THE dispute over tax breaks for the wealthy intensified yesterday as it emerged that better off taxpayers will be able to buy holiday homes and buy-to-let properties through their personal pension funds and get back 51 per cent of the purchase price from the taxman.

A higher-rate taxpayer buying a £100,000 property through a Self-Invested Personal Pension (SIPP) would receive a £23,000 refund personally and a further £28,000 refund into the SIPP, making a total rebate of £51,000.

*

The new rules, which are due to take effect in April, are even more generous than had been supposed, according to James Hay, a unit of Abbey National and Britain’s largest provider Self-Invested Personal Pensions.

The claim that higher-rate taxpayers would be able to buy holiday homes and buy-to-let properties at, in effect, a 40 per cent discount actually understated the benefit, David Baker, a director at James Hay, said.

“It’s extremely generous,” he said. The sums were even more persuasive for the over-50s, he added, because of the ability to take a cash lump sum out of the pension pot.

The reason for the added generosity is that HM Revenue & Customs grosses up the size of the pension contribution at the basic rate of tax before doing the calculations, Mr Baker said.

Yesterday Norwich Union sounded a warning about the over-hyping of SIPP investments in property, saying that some companies were overemphasising the benefits without spelling out the pitfalls.

Iain Oliver, Norwich Union’s head of pensions, said that companies marketing overseas holiday homes were failing to admit that buyers could be liable for capital gains tax in the host country when selling the property.

He is also worried that people with final-salary occupational pensions could be persuaded to transfer funds into a SIPP without understanding what they were sacrificing. The insurer called for SIPPs to be regulated by the Financial Services Authority, an option being considered by the Treasury.

The Treasury played down the prospect of the changes prompting a wave claims by the well-off. There were a range of constraints on putting residential property into a SIPP, it said.

Edited by Catch22

Share this post


Link to post
Share on other sites

Does anyone on here (dare I say it) sniff:

A CONSPIRACY? <_<

Share this post


Link to post
Share on other sites
A higher-rate taxpayer buying a £100,000 property through a Self-Invested Personal Pension (SIPP) would receive a £23,000 refund personally and a further £28,000 refund into the SIPP, making a total rebate of £51,000.

Can someone please explain what they are on about? I am afraid I cannot see how their numbers work although I can get close and might be misunderstanding the pension rules. I certainly do not see how the rules benefit only the wealthy. I thought the idea was:

You make 120.482k over HR threshold [1], and actually receive 72.289k of this after tax. You then put the 72.289k into a pension, and this grows to 100k because the 27.710k of BR tax is added back on. You no longer need to pay the 20.481k of difference between BR and HR tax, so you get it back through your tax return. Net effect is you have 100k in pension, and this cost you 51808 of post-tax income. You paid about 52p for UKP1 of assets but these assets will only really be worth 70p when you come to draw on them. This assumes you still pay HR tax in retirement, that the HR rate is still only 40% then, and also that the 25% lump sum is not abolished.

None of the above is in any way specific to housing, and there is no need to be rich in order to take advantage, although income above HR threshold is required. (It is somewhat off-topic but the very poor get a good deal also as the BR relief is applied whether they pay BR tax or not. Or at least they would if it was not for the MIG. It is probably more useful for housewifes who are only poor on paper than for the genuinely poor)

The way I see it, pension investment is in no way a clear no-brainer however rich you are. It seems attractive in principle but is also risky in an an environment where the regulations change more often than governments and it is already possible to pay >50% tax on some (large) pensions.

I would very much like to know why my figures above do not match those in the article (i.e. why do my numbers suggest UKP1 of assets costs approx 52p and the article claims it is 49p). What am I missing?

Thanks,

MoD

[1] I tried to make the numbers match the article. Here is the same paragraph, except with round numbers: You make 100k over HR threshold, and actually receive 60k of this after tax. You then put the 60k into a pension, and this grows to 83k because the 23k of BR tax is added back on. You no longer need to pay the 17k of difference between BR and HR tax, so you get it back through your tax return. Net effect is you have 83k in pension, and this cost you 43k of post-tax income. You paid about 52p for UKP1 of assets but they will only really be worth 70p when you come to draw on them. This assumes you still pay HR tax in retirement, that the HR rate is still only 40% then, and also that the 25% lump sum is not abolished.

Share this post


Link to post
Share on other sites
Guest Charlie The Tramp
whilel it locks up OAPS

It appears a Mr Brown paid her arrears anonymously for her release from prison. :rolleyes:

Share this post


Link to post
Share on other sites

[deleted by spline - figures originally comfirmed the 52p rebate, but now the article above looks wrong.]

Edited by spline

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.