So we get a 1p reduction in the price of a beer but they are now potentially taking hundreds of thousands of pounds in inheritance tax from hard working families who have saved for their own retirement (i.e. those not entitled to gold plated defined benefit pension schemes, like MPs and civil servants) by bringing personal pension funds into the inheritance tax regime. Sadly I expected no less.
Given that Border Control "Stop the Boats" was one of Starmers priorities, there was no mention of it in the Budget, considering how much it's costing us per day.
You may have seen photos of Bill Gates at Downing Street London 👇 in the company of Keir Starmer and Rachel Reeves in October. There is speculation on X tonight that this meeting has influenced the content of UK Budget announced today, in particular the measures that will adversely affect food production and farmland. Rupert Lowe (MP and farmer) is bitterly angry and swearing at the government. He has put out a message asking Jeremy Clarkson to join him in leading a national campaign to fight for UK food supply and the survival of family farms. This issue is not going away anytime soon, it looks as if Labour Party ministers and the farming communities will be at war over the next few months. DEFRA minister Steve Reed has outraged farmers with his comment on the budget "Farmers will have to learn to do more with less". A disastrous appointment by Keir Starmer that will inflame an already tense situation.
Looks like Billy boy is going to be buying up our farmland like he's doing in the US.
So we get a 1p reduction in the price of a beer but they are now potentially taking hundreds of thousands of pounds in inheritance tax from hard working families who have saved for their own retirement (i.e. those not entitled to gold plated defined benefit pension schemes, like MPs and civil servants) by bringing personal pension funds into the inheritance tax regime. Sadly I expected no less.
Including inherited pensions in the IHT calc seems reasonable to me. Most people piling into a pension pot today are avoiding 42% or 62% tax by doing so, while paying zero tax on the investment gains. Asking for 40% tax on any unspent funds above the relevant threshold upon death isn't wild IMO.
I gather the lump sum that would be due upon death under DB schemes will now be included in the IHT calc. I didn't read into what happens with any monthly payments that are due to be paid to a surviving spouse.
One thing that grates for my personal circumstances (long term partner, not married, have a joint mortgage and kid, piled into pension to avoid tax today and IHT) is that IHT still cares about us being married or in a civil partnership. April 2027 might see a spike in couples getting married.
Including inherited pensions in the IHT calc seems reasonable to me. Most people piling into a pension pot today are avoiding 42% or 62% tax by doing so, while paying zero tax on the investment gains. Asking for 40% tax on any unspent funds above the relevant threshold upon death isn't wild IMO.
The top 10% of taxpayers pay 60% of the income tax revenue in the UK, I think they're entitled to some tax benefits when saving for their retirement, unspent funds are usually there because annuities offer such bad value for most people that they take income drawdown instead. (p.s. any prize for using they're, their and there correctly? )
I gather the lump sum that would be due upon death under DB schemes will now be included in the IHT calc. I didn't read into what happens with any monthly payments that are due to be paid to a surviving spouse.
Most DB don't pay a lump sum on death after retirement and I very much doubt that they will make spouse's pensions liable to IHT although I didn't see it mentioned specifically.
One thing that grates for my personal circumstances (long term partner, not married, have a joint mortgage and kid, piled into pension to avoid tax today and IHT) is that IHT still cares about us being married or in a civil partnership. April 2027 might see a spike in couples getting married.
I am in a very similar situation (30+ years together, not married and have piled into my pension to provide for my retirment rather than have to rely on the State). The tax benefits are an incentive but without that incentive I think the younger, less frugal, generations simply won't pay into pensions as they very much live for today (with the exception of auto enrolment, which is a start but nowhere near enough).
I'm also going to be hit by the rise in tax if I sell my business, 10% now but 18% after April 2026, hardly an incentive for me to carry on working.
Agreed 2027 might see an increase in marriages or civil partnerships, Labour are still consulting on these changes so maybe things like the double taxation of pensions at, effectively, 67% might change.
Remember this is the same party that announced, when in opposition, that they would immediately re introduce the Lifetime Allowance if they won the next election. The Tories had abolished the Lifetime Allowance to try and save the NHS from hemorrhaging senior staff. By stating that they were reintroducing it at a future date (when they won the next election, which they were going to do) Labour were probably going to kill off the NHS, as many senior consultants, specialists and GPs would simply retire before the election to be able to get out without any LA penalty. Labour thankfully back pedalled on that statement, but only after a great deal of lobbying from the pensions industry who pointed out the problems Labour apparently hadn't thought about.
City & BusinessPersonal FinanceThe Crusader HomeFinancePersonal Finance What the Budget means for you - from pensions to Stamp Duty and capital gains tax
Chancellor confirms state pension increase of 4.1% alongside plans to levy inheritance tax on private pensions Pensions will no longer be exempt from inheritance tax from April 2027
1. We should ensure the Wealthy pay their fair share; and 2. Taxing Pensions is terrible
Let's put this into perspective. Firstly, 96% of Estates pay precisely £0 in IHT. So it is only the wealthiest 4% that pay.
Now-let's use a simple example to show how wealthy people avoid paying tax.
Suppose the deceased has 1 child. And an Estate of £550,000. And there are no other applicable exemptions or assets than those listed (for simplicity).
Before 2027, if that Estate is comprised of a £400,000 house. Plus savings/general assets of £150,000. Total IHT bill is £20,000 (40% on taxable assets above £500k)
Whereas if the Estate comprises of a £400,000 house, savings and general assets of £50,000 and a Defined Contribution Pension pot of £100,000 made payable to son, total IHT bill is £0. Because-until 2027-this is a perfectly legal way to avoid paying tax.
I have no problem with people using legal loopholes to legally avoid paying their fair share. Trying to take the moral high ground when a loophole is closed? Not so much.
Yep, I don't disagree with the principle of incentivising people to save for their own retirement. You could argue the incentive is too high today, though.
One alternative approach would be to reduce the relief to 20% and cap at less than £60k, but that's getting away from the philosophy of not impacting working people. I personally prefer Including the value in IHT than paying more tax today.
One thing that needs sorting is the 62% effective tax rate between £100k-£125k and the £100k cliffedge on childcare support. If you have a kid under five, you lose approx. £11k cash if your income is £101k vs £99.9k. If you earn £125k compared to £99.9k, you lose £10k in childcare support and £15.5k in tax. So earn £25k more and lose all of it, or instead put £25k into your pension under salary sacrifice and keep all of it, plus zero tax on the gains. It's nice of the government to let people keep that £25k, but they could easily get their hands on some of it with some tax reform. The situation today is anybody with half a brain earning £100k-£160k is paying everything over £99.9k into pension to avoid the tax, while anybody between £160k-£250k is paying the full £60k into pension. That's a ton of tax avoidance for the relatively well off.
I'd like to see the government be bolder about compulsory pension contributions, but that involves taking decisions for the long term (which governments never do). I don't see any government being crazy enough to reintroduce the lifetime allowance.
Yep, I don't disagree with the principle of incentivising people to save for their own retirement. You could argue the incentive is too high today, though.
One alternative approach would be to reduce the relief to 20% and cap at less than £60k, but that's getting away from the philosophy of not impacting working people. I personally prefer Including the value in IHT than paying more tax today.
One thing that needs sorting is the 62% effective tax rate between £100k-£125k and the £100k cliffedge on childcare support. If you have a kid under five, you lose approx. £11k cash if your income is £101k vs £99.9k. If you earn £125k compared to £99.9k, you lose £10k in childcare support and £15.5k in tax. So earn £25k more and lose all of it, or instead put £25k into your pension under salary sacrifice and keep all of it, plus zero tax on the gains. It's nice of the government to let people keep that £25k, but they could easily get their hands on some of it with some tax reform. The situation today is anybody with half a brain earning £100k-£160k is paying everything over £99.9k into pension to avoid the tax, while anybody between £160k-£250k is paying the full £60k into pension. That's a ton of tax avoidance for the relatively well off.
I'd like to see the government be bolder about compulsory pension contributions, but that involves taking decisions for the long term (which governments never do). I don't see any government being crazy enough to reintroduce the lifetime allowance.
The trouble with the Lifetime Allowance was that it imposed a maximum figure. Regardless of assets or earnings.
There most certainly could be new limits. But they would have to be based on that individual's position in some way. Rather than an arbitrary figure.
Comments
POWER TO THE PEOPLE.
There is speculation on X tonight that this meeting has influenced the content of UK Budget announced today, in particular the measures that will adversely affect food production and farmland. Rupert Lowe (MP and farmer) is bitterly angry and swearing at the government.
He has put out a message asking Jeremy Clarkson to join him in leading a national campaign to fight for UK food supply and the survival of family farms.
This issue is not going away anytime soon, it looks as if Labour Party ministers and the farming communities will be at war over the next few months.
DEFRA minister Steve Reed has outraged farmers with his comment on the budget "Farmers will have to learn to do more with less".
A disastrous appointment by Keir Starmer that will inflame an already tense situation.
Looks like Billy boy is going to be buying up our farmland like he's doing in the US.
https://x.com/Bri_GBrit/status/1851726981831823600
I gather the lump sum that would be due upon death under DB schemes will now be included in the IHT calc. I didn't read into what happens with any monthly payments that are due to be paid to a surviving spouse.
One thing that grates for my personal circumstances (long term partner, not married, have a joint mortgage and kid, piled into pension to avoid tax today and IHT) is that IHT still cares about us being married or in a civil partnership. April 2027 might see a spike in couples getting married.
The top 10% of taxpayers pay 60% of the income tax revenue in the UK, I think they're entitled to some tax benefits when saving for their retirement, unspent funds are usually there because annuities offer such bad value for most people that they take income drawdown instead. (p.s. any prize for using they're, their and there correctly?
I gather the lump sum that would be due upon death under DB schemes will now be included in the IHT calc. I didn't read into what happens with any monthly payments that are due to be paid to a surviving spouse.
Most DB don't pay a lump sum on death after retirement and I very much doubt that they will make spouse's pensions liable to IHT although I didn't see it mentioned specifically.
One thing that grates for my personal circumstances (long term partner, not married, have a joint mortgage and kid, piled into pension to avoid tax today and IHT) is that IHT still cares about us being married or in a civil partnership. April 2027 might see a spike in couples getting married.
I am in a very similar situation (30+ years together, not married and have piled into my pension to provide for my retirment rather than have to rely on the State). The tax benefits are an incentive but without that incentive I think the younger, less frugal, generations simply won't pay into pensions as they very much live for today (with the exception of auto enrolment, which is a start but nowhere near enough).
I'm also going to be hit by the rise in tax if I sell my business, 10% now but 18% after April 2026, hardly an incentive for me to carry on working.
Agreed 2027 might see an increase in marriages or civil partnerships, Labour are still consulting on these changes so maybe things like the double taxation of pensions at, effectively, 67% might change.
Remember this is the same party that announced, when in opposition, that they would immediately re introduce the Lifetime Allowance if they won the next election. The Tories had abolished the Lifetime Allowance to try and save the NHS from hemorrhaging senior staff. By stating that they were reintroducing it at a future date (when they won the next election, which they were going to do) Labour were probably going to kill off the NHS, as many senior consultants, specialists and GPs would simply retire before the election to be able to get out without any LA penalty. Labour thankfully back pedalled on that statement, but only after a great deal of lobbying from the pensions industry who pointed out the problems Labour apparently hadn't thought about.
HomeFinancePersonal Finance
What the Budget means for you - from pensions to Stamp Duty and capital gains tax
https://www.express.co.uk/finance/personalfinance/1969350/budget-means-pensions-stamp-duty-capital-gains-tax
Pensions will no longer be exempt from inheritance tax from April 2027
https://www.which.co.uk/news/article/chancellor-confirms-state-pension-increase-of-4.1-alongside-plans-to-levy-inheritance-tax-on-private-pensions-aEZ8C6G4IxAV
https://www.thesun.co.uk/money/31383501/pension-changes-revealed-budget-2024-autumn-statement/
1. We should ensure the Wealthy pay their fair share; and
2. Taxing Pensions is terrible
Let's put this into perspective. Firstly, 96% of Estates pay precisely £0 in IHT. So it is only the wealthiest 4% that pay.
Now-let's use a simple example to show how wealthy people avoid paying tax.
Suppose the deceased has 1 child. And an Estate of £550,000. And there are no other applicable exemptions or assets than those listed (for simplicity).
Before 2027, if that Estate is comprised of a £400,000 house. Plus savings/general assets of £150,000. Total IHT bill is £20,000 (40% on taxable assets above £500k)
Whereas if the Estate comprises of a £400,000 house, savings and general assets of £50,000 and a Defined Contribution Pension pot of £100,000 made payable to son, total IHT bill is £0. Because-until 2027-this is a perfectly legal way to avoid paying tax.
I have no problem with people using legal loopholes to legally avoid paying their fair share. Trying to take the moral high ground when a loophole is closed? Not so much.
Yep, I don't disagree with the principle of incentivising people to save for their own retirement. You could argue the incentive is too high today, though.
One alternative approach would be to reduce the relief to 20% and cap at less than £60k, but that's getting away from the philosophy of not impacting working people. I personally prefer Including the value in IHT than paying more tax today.
One thing that needs sorting is the 62% effective tax rate between £100k-£125k and the £100k cliffedge on childcare support. If you have a kid under five, you lose approx. £11k cash if your income is £101k vs £99.9k. If you earn £125k compared to £99.9k, you lose £10k in childcare support and £15.5k in tax. So earn £25k more and lose all of it, or instead put £25k into your pension under salary sacrifice and keep all of it, plus zero tax on the gains. It's nice of the government to let people keep that £25k, but they could easily get their hands on some of it with some tax reform. The situation today is anybody with half a brain earning £100k-£160k is paying everything over £99.9k into pension to avoid the tax, while anybody between £160k-£250k is paying the full £60k into pension. That's a ton of tax avoidance for the relatively well off.
I'd like to see the government be bolder about compulsory pension contributions, but that involves taking decisions for the long term (which governments never do). I don't see any government being crazy enough to reintroduce the lifetime allowance.
There most certainly could be new limits. But they would have to be based on that individual's position in some way. Rather than an arbitrary figure.