High earners were dealt a double blow in Alistair Darling’s Budget, which raised the highest rate of income tax to 50 per cent and curbed the amount of tax relief they can claim on pension contributions.
In what the accountants and advisers quickly dubbed the “Robin Hood Budget”, Darling also said people who try to evade paying tax would be named and shamed by the Revenue.
Other elements included were an increase to the Individual Savings Account annual limit to £10,200, an extension of the Stamp Duty Holiday for properties worth £175,000 or less and the ability to carry back losses on investment to previous years.
To explain the details of the report and what it will mean for you, John Whiting, tax partner at PricewaterhouseCoopers, will answer your questions today at 3pm.
Mr Whiting has been a tax partner with PricewaterhouseCoopers since 1984, working on most areas of taxation including many years of involvement with Employment taxation.
Mr Whiting is a former President of the Chartered Institute of Taxation and chairs their Management of Taxes Committee.
Post a question now to John at firstname.lastname@example.org or use the online submissions form below.
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How soon can people aged 50 or over top up this year’s cash ISA from 3600 to the new limit of 5100? Can the additional £1500 allowance be moved as early as today?
Bob Drake, Swansea
It’s available to those aged 50 and over from 6 October - so you can put in the extra for the year from that time. It’s worth stressing that from that time you can put in the whole of the extra allowance if you wish - ie the £1500 cash or £3000 overall. You don’t have to apportion the limit for the half year.
John Whiting, tax partner, PWC
I am about to take early retirement and redundancy from my present employers. My current salary in not in excess of 150K but I do want to take a lump sum from my pension on retirement of 125K approx. Will the new tax levels apply, as I thought this would be tax free? Regards,
K Moore, Surrey
Your lump sum from your pension scheme, provided it’s within the usual limits, won’t be taxed - nothing in the Budget changes will affect the situation you describe.
I have a question arising from the budget changes. If I earn £120,000 per year and contribute, say, £70,000 of these earnings to my personal pension fund, would I lose any of my personal allowance?
Mike Piggin, TPA Solutions
The clawback of personal allowances starts when your ’adjusted net income’ is above £100,000. The ’ANI’ is your total income subject to income tax (so including investment income) but after deducting pension contributions and gift aid, and indeed losses from a business.
Could you please tell me precisely how the provision to curb the personal allowance for someone earning over 100k works? And does it apply only to earnings from employment or would income from a non-state pension be included for this purpose? Thanks very much,
The clawback will work by reducing your personal allowance by £1 for every £2 that your taxable income is over £100,000. So if your income is (say) £105,000, your allowance would be reduced by £2,500 - on current figures that means the allowance of £6475 comes down to £3975. And income for these purposes includes pensions, including the state pension.
What help is there for single parents who can’t work? I have four children of which two of them have special needs and I can’t claim dla for them although I get low mobility for one. I cant work as they need my time. Is there anything in the Budget for me? Lorraine, Tyne and Wear
Lorraine, Tyne and Wear
There wasn’t a lot of immediate help to you in the Budget. That said, the amounts you get in child benefit would have increased from January as a result of the pre-budget report. There are some small extras in the Budget such as more money for your children’s Child Trust Fund but the extra for CTF is dependant on them being elegible for the disabled living allowance, unfortunately.
Will pension contributions made through salary sacrifce schemes be affected by the Budget?
Ivy Lam, London
This depends on your level of income, I think. The plan to restrict tax relief from 2011 for incomes of over £150,000 contains measures to prevent sidestepping through salary sacrifice, we understand. But salary sacrifice does still offer tax efficiencies for those on incomes below the cut off of £150,000.