Latest news with #ShaunMoore
Daily Mail
22-04-2025
- Business
- Daily Mail
Lifetime Isa penalties too complex for even 'financially literate' savers to grasp
Early Lifetime Isa withdrawal penalties are too complicated, a government report suggests, with even clued-up savers losing out due to a lack of understanding. HMRC found that even those classed 'highly financially literate' often 'overlooked the fact the withdrawal charge penalises the saver beyond the level of bonus on the amount originally invested.' The report added: 'Very few Lisa holders in this research understood the withdrawal charge in full.' For those that were unaware of the full conditions placed on Lisa withdrawal, many viewed the charges as unfair, according to HMRC. Shaun Moore, tax and financial planning expert at Quilter, said: 'People simply do not realise it's not just a clawback of the Government bonus – it's a loss on their own money.' Lisas, launched in 2017, allow holders to save or invest up to £4,000 per tax year, on which they will receive a 25 per cent bonus from the Government on contributions up until they reach 50. Savers can withdraw their funds, along with the bonus, when they purchase their first house, reach the age of 60 or have a terminal illness. Lisa holders can choose to withdraw their funds from their account without meeting these requirements, but doing so will incur a 25 per cent penalty. But not only does this knock out the 25 per cent from the Government, it will also eat into the savings the account holder has themselves contributed. For example, a Lisa containing £800 as well as a £200 contribution from the Government would face a charge of £250 for an unauthorised withdrawal. This means that you would lose out on £50 of your original contribution – scaled up for an account holding £10,000 including the bonus, this is a £2,500 penalty and a loss of £500 of the original contribution. Moore said: 'Once participants in the research understood this, there was broad consensus that the current rules feel unfair. 'Many supported a reduction of the withdrawal charge to 20 per cent, which would at least allow savers to break even if circumstances forced them to dip into their pot.' 'This sentiment was particularly strong among lower-income "irregular" and "cushioned savers", who felt they were being penalised for financial instability rather than poor planning.' 'Savers reported feelings of resentment and frustration at the idea of being charged to access what they saw as their own money, particularly when providers are profiting from holding those funds.' Houses purchased using a Lisa must also be worth less than £450,000, something that has become a problem for many buyers with house prices having risen considerably since the accounts were introduced. If the limit had increased with inflation it would now be around £600,000. Moore added: 'People are much more likely to understand the product if it has one clear purpose: to get on the housing ladder. 'To improve transparency and engagement, we believe the Government should simplify the product and rebrand it as a "First Home Account".'
Scottish Sun
22-04-2025
- Business
- Scottish Sun
Millions of pensioners to pay an extra £3,019 in huge retirement tax bill
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) MILLIONS of pensioners will have forked out an extra £3,019 in income tax once the thresholds are unfrozen in 2028. Normally, tax thresholds increase every year to account for the fact that wages have risen in line with inflation, as this stops people being left worse off in real terms. Sign up for Scottish Sun newsletter Sign up 1 The Sun previously revealed that 8.2million people over 60 will be dragged into paying income tax by 2028 In April 2021, the then-Conservative government made the decision to freeze all tax thresholds, a measure now set to remain in place until 2028. While the cost of essential goods and services has risen significantly, income tax thresholds have stayed unchanged. This decision was aimed at raising additional revenue, as freezing the thresholds means more people end up paying tax or being pushed into higher tax brackets. However, this has left retirees facing much higher tax bills simply to maintain their current standard of living. This phenomenon, known as fiscal drag, occurs when incomes and spending increase to keep up with inflation, but tax thresholds remain static, resulting in a higher tax burden. For pensioners, it highlights a system that hasn't adapted to the realities of rising costs. As tax thresholds have remained frozen, a typical pensioner earning £327 a week (before housing costs), which amounts to an annual income of £19,189, is expected to pay £9,261 in income tax by 2028. If income tax thresholds had risen in line with inflation since 2021, this amount would have been lower at £6,242. As a result, pensioners are forecast to pay an extra £3,019 in tax simply because the thresholds have not been adjusted to account for inflation. Shaun Moore, tax and financial planning expert at Quilter: "Due to years of unchanged thresholds, pensioners are gradually being pulled into paying more tax. How to track down lost pensions worth £1,000s "What was once considered a modest retirement income is now subject to increasing levels of tax each year as tax bands remain frozen in time. "This has led to an unexpected additional £3,000 tax burden that many pensioners were not prepared for. "Although it may not seem like a tax hike, the financial strain is very real for those on fixed incomes." It comes just days after The Sun revealed that 8.2million people over the age of 60 will be dragged into paying income tax by 2027/28. And those are only some of the millions of households expected to have to start paying income tax as a result of the ongoing freeze to tax thresholds. Data provided by HMRC through a freedom of information (FOI) request by wealth manager Quilter, shared exclusively with The Sun, shows nearly 18million people will be forced to pay income tax overall. Of those, 11.6million will be affected over the next three years, with 8.2million of those individuals over the age of 60. This suggests millions of people in receipt of state pension or other pensions will start paying tax on their retirement income for the first time. Additionally, 12million people are set to be dragged into the higher rate of income tax, which is 40% of any income over £50,271, with 8.2million expected to be hit in the next three years. The state pension rises each year under the "triple lock" system, which ensures it increases by whichever is highest: wage growth, 2.5%, or September's inflation rate. This year, the rise is based on wage growth, resulting in a 4.1% increase. As a result, the full rate of the new state pension has gone up from £221.20 per week to £230.25, equating to £11,973 annually. Meanwhile, the basic rate of the old state pension has risen from £169.50 per week to £176.45, totalling £9,175.40 per year. The personal allowance — the amount you can earn each year without paying tax — remains fixed at £12,570. If your income exceeds this threshold, you will be required to pay income tax on the amount above £12,570. STATE PENSION BASICS AT the moment the new state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046. It is a recurring payment from the government most Brits start getting when they reach the state pension age. However, not everyone gets the same amount, and you are awarded depending on your national insurance record. For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings. The new state pension is based on people's National Insurance records. Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension. You earn national insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit. If you have gaps, you can top up your record by paying in voluntary National Insurance contributions. To get the old, full basic state pension, you will need 30 years of contributions or credits. You will need at least 10 years on your NI record to get any state pension. The full rate of the new state pension is £230.25 a week - or £11,973 a year. Under the old system, the full basic state pension is £176.45 per week and is paid to those who retired before April 6, 2016. How much income tax do you have to pay? You currently pay no income tax if you earn £12,570 or less. On earnings between £12,570 and up to £50,270 you pay the basic income tax rate of 20%. So, if your earnings are £20,000, you pay income tax on £7,429. Earnings between £50,270 and up to £125,140 are taxed at 40%. The additional income tax rate, which applies to earnings over £125,140, is 45%. Income tax thresholds generally rise yearly so that people can earn more without paying more tax. However, the Government has frozen them in recent years in order to boost its coffers.
The Sun
22-04-2025
- Business
- The Sun
Millions of pensioners to pay an extra £3,019 in huge retirement tax bill
James Flanders, Chief Consumer Reporter Published: Invalid Date, MILLIONS of pensioners will have forked out an extra £3,019 in income tax once the thresholds are unfrozen in 2028. Normally, tax thresholds increase every year to account for the fact that wages have risen in line with inflation, as this stops people being left worse off in real terms. In April 2021, the then- Conservative government made the decision to freeze all tax thresholds, a measure now set to remain in place until 2028. While the cost of essential goods and services has risen significantly, income tax thresholds have stayed unchanged. This decision was aimed at raising additional revenue, as freezing the thresholds means more people end up paying tax or being pushed into higher tax brackets. However, this has left retirees facing much higher tax bills simply to maintain their current standard of living. This phenomenon, known as fiscal drag, occurs when incomes and spending increase to keep up with inflation, but tax thresholds remain static, resulting in a higher tax burden. For pensioners, it highlights a system that hasn't adapted to the realities of rising costs. As tax thresholds have remained frozen, a typical pensioner earning £327 a week (before housing costs), which amounts to an annual income of £19,189, is expected to pay £9,261 in income tax by 2028. If income tax thresholds had risen in line with inflation since 2021, this amount would have been lower at £6,242. As a result, pensioners are forecast to pay an extra £3,019 in tax simply because the thresholds have not been adjusted to account for inflation. Shaun Moore, tax and financial planning expert at Quilter: "Due to years of unchanged thresholds, pensioners are gradually being pulled into paying more tax. How to track down lost pensions worth £1,000s "What was once considered a modest retirement income is now subject to increasing levels of tax each year as tax bands remain frozen in time. "This has led to an unexpected additional £3,000 tax burden that many pensioners were not prepared for. "Although it may not seem like a tax hike, the financial strain is very real for those on fixed incomes." It comes just days after The Sun revealed that 8.2million people over the age of 60 will be dragged into paying income tax by 2027/28. And those are only some of the millions of households expected to have to start paying income tax as a result of the ongoing freeze to tax thresholds. Data provided by HMRC through a freedom of information (FOI) request by wealth manager Quilter, shared exclusively with The Sun, shows nearly 18million people will be forced to pay income tax overall. Of those, 11.6million will be affected over the next three years, with 8.2million of those individuals over the age of 60. This suggests millions of people in receipt of state pension or other pensions will start paying tax on their retirement income for the first time. Additionally, 12million people are set to be dragged into the higher rate of income tax, which is 40% of any income over £50,271, with 8.2million expected to be hit in the next three years. The state pension rises each year under the "triple lock" system, which ensures it increases by whichever is highest: wage growth, 2.5%, or September's inflation rate. This year, the rise is based on wage growth, resulting in a 4.1% increase. As a result, the full rate of the new state pension has gone up from £221.20 per week to £230.25, equating to £11,973 annually. Meanwhile, the basic rate of the old state pension has risen from £169.50 per week to £176.45, totalling £9,175.40 per year. The personal allowance — the amount you can earn each year without paying tax — remains fixed at £12,570. If your income exceeds this threshold, you will be required to pay income tax on the amount above £12,570. STATE PENSION BASICS AT the moment the new state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046. It is a recurring payment from the government most Brits start getting when they reach the state pension age. However, not everyone gets the same amount, and you are awarded depending on your national insurance record. For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings. The new state pension is based on people's National Insurance records. Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension. You earn national insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit. If you have gaps, you can top up your record by paying in voluntary National Insurance contributions. To get the old, full basic state pension, you will need 30 years of contributions or credits. You will need at least 10 years on your NI record to get any state pension. The full rate of the new state pension is £230.25 a week - or £11,973 a year. Under the old system, the full basic state pension is £176.45 per week and is paid to those who retired before April 6, 2016. How much income tax do you have to pay? You currently pay no income tax if you earn £12,570 or less. On earnings between £12,570 and up to £50,270 you pay the basic income tax rate of 20%. So, if your earnings are £20,000, you pay income tax on £7,429. Earnings between £50,270 and up to £125,140 are taxed at 40%. The additional income tax rate, which applies to earnings over £125,140, is 45%. Income tax thresholds generally rise yearly so that people can earn more without paying more tax. However, the Government has frozen them in recent years in order to boost its coffers. What is the personal allowance? THE personal allowance is the amount you can earn each year tax-free. In the current tax year - which runs from April 6 2024 to April 5 2025 - the figure is £12,570. Any earnings above this threshold are taxed at different rates, depending on the income bracket. However, this amount may be larger if you claim certain allowances, including a blind person's allowance, marriage allowance and child tax credit. Income tax also applies to money you make outside your job, not just your earnings. But there are also some tax-free allowances on top of the personal allowance for these other sources of income. If you are self-employed, you don't have to pay tax on savings interest, dividends and the first £1,000 of income.
Yahoo
12-03-2025
- Business
- Yahoo
Number of taxpayers dragged into paying higher rate soars 15%, figures show
The number of higher-rate taxpayers topped five million for the first time, as a freeze on thresholds saw more earners dragged into the higher tax band, new figures from HM Revenue & Customs show. In the 2022-23 tax year, there were 5.1 million people paying the higher rate – amounting to 680,000, or 15.3%, more than the previous year. In comparison, five years earlier, there were 4.2 million people paying the higher rate. An income tax rate of 40% applies to earnings over £50,271. This threshold has been frozen at the 2021-22 level and will remain in place until April 2028. Previously, most thresholds were due to rise in line with inflation – but the freeze, introduced by the previous Conservative government, meant more people were dragged into a higher tax bracket if their earnings grew. HMRC's figures, which are the most up to date, recognise that so-called 'fiscal drag' is behind the latest surge in higher-rate taxpayers. Higher-rate taxpayers made up 15% of all taxpayers and accounted for 35% of the total amount raised by the Government from income tax in 2022-23. The number of people paying the additional tax rate also rose to 600,000 in 2022-23 – 9.5% more than the prior year. The additional rate of 45% is placed on earnings over £125,140. These 600,000 additional-rate taxpayers made up nearly 2% of all taxpayers and accounted for 34% of income tax raised. Furthermore, a freeze in the personal allowance threshold – which means income up to £12,750 is not taxed – resulted in 1.5 million more people paying income tax in 2022-23. Shaun Moore, tax and financial planning expert at Quilter, said: 'The impact of the Government's fiscal drag policy has been laid bare in this morning's personal income statistics from HMRC,' adding that the increase in overall taxpayers came as 'wages climbed while income tax thresholds remained stagnant'. 'The data indicates that higher and additional rate taxpayers, totalling 5.7 million individuals, contributed 68.7% of the UK's income tax revenue during the period. 'In contrast, 28.2 million basic rate taxpayers and 0.6 million savers rate taxpayers account for the remaining share. 'This highlights the significant role higher earners play in overall tax receipts. 'With income tax thresholds frozen until 2028, this figure is expected to rise as more people's salaries exceed the higher-rate thresholds.'
The Independent
12-03-2025
- Business
- The Independent
Number of taxpayers dragged into paying higher rate soars 15%, figures show
The number of higher-rate taxpayers topped five million for the first time, as a freeze on thresholds saw more earners dragged into the higher tax band, new figures from HM Revenue & Customs show. In the 2022-23 tax year, there were 5.1 million people paying the higher rate – amounting to 680,000, or 15.3%, more than the previous year. In comparison, five years earlier, there were 4.2 million people paying the higher rate. An income tax rate of 40% applies to earnings over £50,271. This threshold has been frozen at the 2021-22 level and will remain in place until April 2028. Previously, most thresholds were due to rise in line with inflation – but the freeze, introduced by the previous Conservative government, meant more people were dragged into a higher tax bracket if their earnings grew. HMRC's figures, which are the most up to date, recognise that so-called 'fiscal drag' is behind the latest surge in higher-rate taxpayers. Higher-rate taxpayers made up 15% of all taxpayers and accounted for 35% of the total amount raised by the Government from income tax in 2022-23. The number of people paying the additional tax rate also rose to 600,000 in 2022-23 – 9.5% more than the prior year. The additional rate of 45% is placed on earnings over £125,140. These 600,000 additional-rate taxpayers made up nearly 2% of all taxpayers and accounted for 34% of income tax raised. Furthermore, a freeze in the personal allowance threshold – which means income up to £12,750 is not taxed – resulted in 1.5 million more people paying income tax in 2022-23. Shaun Moore, tax and financial planning expert at Quilter, said: 'The impact of the Government's fiscal drag policy has been laid bare in this morning's personal income statistics from HMRC,' adding that the increase in overall taxpayers came as 'wages climbed while income tax thresholds remained stagnant'. 'The data indicates that higher and additional rate taxpayers, totalling 5.7 million individuals, contributed 68.7% of the UK's income tax revenue during the period. 'In contrast, 28.2 million basic rate taxpayers and 0.6 million savers rate taxpayers account for the remaining share. 'This highlights the significant role higher earners play in overall tax receipts. 'With income tax thresholds frozen until 2028, this figure is expected to rise as more people's salaries exceed the higher-rate thresholds.'
