[acerboo]

does anyone know how this works, ie if you have 2 houses now will tax have to be paid on one of these

[peterg1965]

This all speculation at the moment, You will have to wait until 22 June - the emergency budget - to hear the details. David Cameron has already alludedto the fact that 'business gains' are supposed to be exempt and it will be 'private gains' which will be targeted, and this may be retrospective too, to stop people frantically trying to sell their assets.

Difficult one this, the Govt have to find money from somewhere but it will alientate core Tory voters. So long as they do not touch Higher Rate Tax relief on pension contributions - from a purely selfish perspective!

[ibanezking]

yes, only one can be classed as your main residence.............
and you will pay CGT on any profit you make on the 2nd property

Some people say you can get round by having one house in your name and one in your wifes............ but i think you would have to prove you both lived in each house seperately........

Either way - they'll "have" you............

[dxb335d]

Fuckin Joke I THINK.

[jvowles]

lets wait and see - nothing confirmed yet.

[acerboo]

Originally Posted by dxb335d

Fuckin Joke I THINK.

i dont think THEY are joking! personally i think it will do more harm than good and ultimately produce less tax for them.

[MB London]

Dont tell 'em

[SteveC]

Originally Posted by peterg1965

So long as they do not touch Higher Rate Tax relief on pension contributions - from a purely selfish perspective!

I keep reading about so-called tax relief on pensions

Tax relief means you don't pay tax, but in the case of pensions that's not correct. When you put money into a pension you don't pay tax, but you also can't access the money. When you do finally take the money as a pension you pay tax, so where's the relief?

What they really mean is deferred tax ie. Instead of paying tax now when you invest the money in a pension, you pay tax later when you take the money out of the pension

As far as I can see, getting rid of tax 'relief' on pensions means that you pay tax when the money goes into the pension and pay tax again when it comes out, effectively destroying pensions savings for higher earners by making it ridiculously tax inefficient.

The current UK tax system is utterly iniquitous for both low and high income earners alike

[rogerxp]

Originally Posted by SteveC

Tax relief means you don't pay tax, but in the case of pensions that's not correct. When you put money into a pension you don't pay tax, but you also can't access the money. When you do finally take the money as a pension you pay tax, so where's the relief?

It's best as a higher rate tax payer. You get 40% tax break on your contribution (20% uplift to your contribution & 20% back via a reduction of your tax code; therefore in your back-pocket). Your contribution, and the uplift, is then invested in a tax 'efficient' pot. You therefore gain growth on the 'tax releif' money until retirement. Take your 25% tax-free cash at retirement and the rest as income. The income is taxed but most likely now a basic rate taxpayer.

So, 40% releif in, growth on this for 10/20/30/40? years, tax-free cash, 20% tax out on the balance income.

Still the same process as a basic rate tax-payer just not as effective as it's 20% in and not 40% (effect on your pension pot the same as the rest has reduced your tax code).

[peterg1965]

Originally Posted by rogerxp

It's best as a higher rate tax payer. You get 40% tax break on your contribution (20% uplift to your contribution & 20% back via a reduction of your tax code; therefore in your back-pocket). Your contribution, and the uplift, is then invested in a tax 'efficient' pot. You therefore gain growth on the 'tax releif' money until retirement. Take your 25% tax-free cash at retirement and the rest as income. The income is taxed but most likely now a basic rate taxpayer.

So, 40% releif in, growth on this for 10/20/30/40? years, tax-free cash, 20% tax out on the balance income.

Still the same process as a basic rate tax-payer just not as effective as it's 20% in and not 40% (effect on your pension pot the same as the rest has reduced your tax code).

Sounds like the words of an expert! I get 40% tax relief going in and will certainly be a higher rate tax payer (40%, if that is the prevailing rate in 10 years time) the when my pensions are all crystallised. So I am just getting some 'free' money to invest for the duration and will eventually have to pay it back. I do hope that this is how the Govt see this. There has to be some incentives for Higher Rate Tax payers in my view, and there are already some limits to it, tapered relief between £100K and £150K, and you can 'only' invest up to £200K or so a year or max salary to get any relief. Any pension pot investments above the 'lifetime limit', currently £1.7M or so, carries with it some punitive tax rates.

If the Government have any sense they will leave the rules for personal pensions alone. It is the public sector pension schemes that have a massive burden on the State, that is where the axe should begin to fall, not necessarily retrospectively but for new joiners, and I say that as a future recipient of a Public Sector pension.

[SteveC]

Pensions become idiotic when money is taxed going and coming out.

Why would anyone pay tax on money then put it into a mechanism where the money is taxed again when its taken out?

Given that its not possible to differentiate pension that had relief from pension that didn't, the whole system is now utterly, basically flawed....like most other half baked legislation from the previous Government.

[Spear_j]

"Flip" your house - good enough for those fine and upstanding MPs.....am joking

But as long as you actually live in your 2nd home and not your main home for a "reasonable period" prior to selling you can claim for Princple Private Residence Relief on it. I know this is a bit of a hassle but worth it to plan avoid paying 40% on disposal. Alternatively, as every individual has a CGT allowance of £10.1k per tax year offset the gain by splitting the "ownership" of the property between a number of individuals.....You may need to look at drawing up a legal document (for £500) by Solicitors to reflect such an arrangement just in case HMRC investigate. Always ways and means with tax planning

[rogerxp]

Originally Posted by peterg1965

If the Government have any sense they will leave the rules for personal pensions alone.

They have to be very very careful with their tweaks. Essentially the reason the tax breaks are there (whether you're a 'beleiver' or not) are because the Government know that the state pension is f*cked and going to get worse as time ticks on. The tax breaks are there to 'tempt' people to start making their own provision. If the Government alienate those who 'beleive' in pensions too much they will stop contributing and then the country is really f*cked.

You'll have an aging population solely relying upon the state (who already can't support us - scroll forward 20/30 years and see what mess we're in!!!) - all pensioners in poverty doesn't appeal.

If you don't make your own provision you'll have to reply on the state. Currently a single person's 'basic' state pension is £5k p/a or £8k p/a for a married couple (not doubled for a couple!!!) - there are various top-ups to this but it's still not enough to realistically live on.

You've basically got no choice but to save yourself. If you don't like pensions then use ISAs or anything else but don't do nothing. Some use property as their pension (but this isn't without risk), some say their business is their pension (once again not without risks). You may moan now at the aledged lack or generosity by the Government but you'll moan a shit load more when you've retired and have no money.

Lecture over...

As for CGT, I've got a little lost in all the changes/suggestions, but what spear_i says sounds pretty good.

[peterg1965]

Well said Roger.

Originally Posted by rogerxp

Currently a single person's 'basic' state pension is £5k p/a or £8k p/a for a married couple (not doubled for a couple!!!) - there are various top-ups to this but it's still not enough to realistically live on.

Is this statement true for a couple who both have paid their 30 years of NI contributions? I thought in that case they would both receive the 'full' £5K of pensions - ie £10K. £8K is for a couple where one of them (usually the woman) has paid insufficient NI contributions.

[chrisbin]

spear has some good practical advice (voe).

btw The only thing that is likely to change is the percentage charge, cgt is chargeable now on the sale of a non-primary residence.....

All of this assumes that you sell it for more than you paid for it...

[rogerxp]

Originally Posted by peterg1965

Is this statement true for a couple who both have paid their 30 years of NI contributions? I thought in that case they would both receive the 'full' £5K of pensions - ie £10K. £8K is for a couple where one of them (usually the woman) has paid insufficient NI contributions.

Now you've got me Peter Not 100% sure (I'm no expert on the state pension as I always tell my clients to assume you'll get nothing i.e. make sure you're going to be comfortable yourself and then anything you do get is a bonus so don't really keep up to speed on it).

This is what I have grabbed from t'internet -:

How Much Will You Get?

Basic State Pension (BSP)

The full BSP from 6 April 2010 is:

•Single person - £97.65 per week
•Married Couple - £156.15 per week
The rates shown are the maximums available. If you do not have the maximum qualifying years required to get the full BSP, you will be entitled to a lower amount based on the number of qualifying years on your record.

State Second Pension (S2P)

The amount of S2P you will receive is based upon on your earnings above and below the Lower and Upper Earnings Limits. It will also depend on whether or not you were contracted-out through a pension plan. The calculation of the State Second Pension is complicated and has been changed since its introduction in 1978. Since 6 April 2002, its calculation basis was changed to be more generous for low and moderate earners.

Graduated Retirement Benefit

The rate is dependent on how many contributions you made between April 1961 and April 1975. For every £7.50 (man) or £9 (woman) of graduated contributions paid, you get 11.53 pence.

Women reaching State Pension Age (SPA) after 5 April 2010 will have their Graduated Retirement Benefit worked out on the same basis as men. This means the total number of graduated contributions will be divided by £7.50.

Pension Credit

The aim of Pension Credit is to give everyone aged 60 and over an income of at least:

•£132.60 a week (single person); or
•£202.40 a week (two people living together).
These are the standard rates. An individual who is a registered carer may get an extra £30.05 a week and a registered disabled person may qualify for an extra £53.65 a week.

Individuals over aged 65 may also be rewarded for their savings, by up to:

•£20.52 a week (single person); or
•£27.09 a week (two people living together).
Claims for Pension Credit made on or after 6 October 2008 will only be backdated for payment by up to three months. Claims made before 6 October 2008 will be backdated by up to 12 months.

Age 80s Age Addition

When you reach 80 the state pension is automatically increased by 25 pence a week.

Sorry, this seems to be a duel thread on pensions & CGT now!! This is what the Government called 'simplifying pensions' !!!!!!!

[Teutonicdriver]

That 25pence per week pension rise at 80 yrs of age is a pisstake. It will cost more to arrange than its worth. What will 25p buy anyone??? They would be better off scrapping it.

[peterg1965]

Roger, The 'married couple' pension is for when a woman claims 60% of her husbands pension rate when she has insufficient NI contributions to claim a state pension in her own right. If both have full NI contributions (30 years) then both get the full state pension: (from direct.gov)

In 2010-2011, the full basic State Pension is £97.65 a week. The full basic State Pension for a married woman using her husband’s National Insurance record is £58.50 a week.

This means that a married couple could get separate basic State Pension payments totalling £156.15 a week. If they both qualify for a full basic State Pension this could be £195.30 a week.

[rogerxp]

Good input Still bollocks all though