Latest news with #income tax
Irish Times
5 days ago
- Business
- Irish Times
Income tax dilemma for Government as VAT cuts could cost €1bn
The income tax dilemma faced by the Government in framing October's budget is underlined in key pre-budget papers, which say that indexing tax bands and credits for inflation would cost over €1 billion. This is why Ministers are now considering holding off the proposed cut in VAT for the hospitality sector to 9 per cent until the middle of next year , as they need to leave funds to increase income tax credits and widen tax bands, to ensure wage inflation does not lead to a higher tax burden on households. The Tax Strategy Group papers, drawn up by senior civil servants to outline budget options, outline the high cost of cutting VAT on hospitality. The full year cost of a cut to the VAT rate in all areas of hospitality is just over €800 million. Adding hairdressers and entertainment brings the total to €867.7 million. If the Government also decides to extend the VAT cut on household energy bills, the total rises to over €1.05 billion. As well as deferring the cut to the middle of the year, the Government may also consider restricting it to the food and catering element of hospitality and excluding accommodation, which would save €134 million in a full year. However, the papers warn that there are 'practical operational concerns in having different VAT rates applying to hotel accommodation and meals given how the sector operates, with various packages ranging from bed and breakfast accommodation through to all-inclusive board and lodging packages. ' READ MORE [ Government likely to delay VAT reduction for hospitality sector until mid-2026 Opens in new window ] However, the civil servants did not repeat their strong criticism of the proposed cut in the 2024 papers, when they argued the cut from 13.5 per cent to 9 per cent would be 'unjustified' and represent an 'enormous fiscal transfer of taxpayer's money' to one sector On income tax, the papers estimate that wage growth will run at about 4 per cent next year and that adjusting income tax credits and bands to account for this would cost more than €1 billion in 2026. This would be roughly in line with the tax package introduced for this year. The papers also provide the latest estimates of who pays income tax in Ireland, with the top 1 per cent of taxpayers – earnings over €297,000, paying 23.4 per cent of all income tax and USC and the top 10 per cent, earning more than €106,500, paying 63 per cent of the total. Some 1.1 million earners are exempt from income tax completely. The papers also look at the politically controversial issue of inheritance tax , including a commitment by the Minister for Finance that the issue of how different relationships are treated would be examined. In particular, the threshold at which brothers, sisters, nephews and nieces of the person giving the gift or leaving the inheritance become liable to tax is €40,000, compared to €400,000 for children. The department points out that it is not unusual for tax systems internationally to treat different relationships with the person giving a gift or leaving an inheritance differently. Also, 70 per cent of those who had received a substantial inheritance or gift had received it from their parents. While the papers say it is not possible to estimate precisely the cost of having everyone now on the €40,000 threshold moved to the €400,000 one, it would not be greater than around €300 million. The civil servants suggest that another way to proceed would be to allow a person to choose one or two heirs to their estate, who would benefit from the €400,000 threshold. The civil servants also say that the Government could consider restricting the ' spiralling cost ' to the exchequer of relief for people passing on farms and businesses. The civil servants also modelled a scenario where CAT tax rates increased with the size of the inheritance. However, given the sensitivity of this area, this is unlikely to be taken up politically.
CNA
7 days ago
- Business
- CNA
‘Important' for Johor to get back 25 per cent of tax revenue given to federal government: Regent
KUALA LUMPUR: Johor Regent Tunku Ismail Sultan Ibrahim has again called for a larger portion of the state's income tax revenue that goes to federal coffers to be returned to it. This comes amid growing concerns over infrastructure development and project delays in the southern state, he said. 'When 25 per cent of Johor's income tax revenue is returned to Johor, Johor can stand on its own feet,' he wrote in a Facebook post on Tuesday (Jul 22). The regent had previously said that Johor gave the federal government about RM48 to RM49 billion (US$11.36 billion to US$11.59 billion) a year in tax revenue, but received only RM1.4 billion in return. That amounts to an estimated 2.85 per cent return. Tunku Ismail's latest comments came following news of the postponement of the Pasir Gudang Hospital's phased opening. Initially scheduled for next month, it has been delayed to January 2026, much to the regent's disappointment. Tunku Ismail also pointed to the issue of autogates system disruptions at Johor's major land checkpoints - the Sultan Iskandar Building and the Sultan Abu Bakar Complex - as well as matters related to flood mitigation projects as to why more of the state's revenue should be returned to them. 'I wish to convey to Johoreans how important it is for 25 per cent of the state's income tax revenue to be returned to Johor. 'Through this tax return, we would not need to burden the federal government or submit applications to (them) and then endure a long wait for approval,' he said. Malaysia's constitution centralises revenue collection - including all forms of taxes - at the federal level. The federal government then returns a percentage of this to the states based on their population. According to a commentary posted on the ISEAS-Yusof Ishak Institute's website in December 2023, state governments received revenue of RM926 per capita, about one-tenth of the federal government's RM8,969 per capita tax in the year 2022. In June last year, Tunku Ismail said Putrajaya should stop viewing Johor as 'belonging to Malaysia', likening the state to being a beggar for constantly having to highlight its needs. He had then also urged the federal government to consider allowing Johor to keep 20 per cent to 30 per cent of its tax revenue in the state 'Until when is Johor going to be a beggar? The system in the federal government from then until now must change, as Johor does not belong to Malaysia. We are partners, so you have to start treating us like partners,' he was quoted as saying by news portal Scoop. Tunku Ismail was appointed Johor regent at the end of January 2024 after his father ascended the throne to become Malaysia's king for a five-year term. Penang's chief minister Chow Kon Yeow had in June this year also renewed calls for the federal government to consider returning 20 per cent of tax revenue to the state for its development. He had said Penang continued to be among the top contributors to Malaysia's national coffers, but has been "shortchanged" when it comes to federal allocations. "Now is an appropriate time for the federal government to consider this seriously and not just push it aside," he was quoted as saying by the News Straits Times. Sabah has also for years also been trying to negotiate a return of its entitlement of 40 per cent of its revenue as stated in the federal constitution, which it says is crucial for economic development.
Yahoo
19-07-2025
- Politics
- Yahoo
Michigan elections panel clears way for recall effort targeting state Rep. Peter Herzberg
Michigan's elections panel cleared the way for a recall effort targeting state Rep. Peter Herzberg, a Democrat from Westland, for his vote against a Republican plan to lower the state's income tax rate. The Board of State Canvassers unanimously agreed July 18 that the the petition provided a factual and sufficiently clear reason for the recall effort, enabling the petition's sponsor — Keith Butkovich — to begin collecting signatures asking voters in Herzberg's district to weigh whether to keep their current state representative or replace their representative with a challenger. Under Michigan election law, Herzberg has a 10-day window following the board's vote to appeal the determination. To hold a recall election requires signatures from voters in the district equal to at least 25% of the number of votes cast in the district in the most recent gubernatorial election held in 2022. Signatures must be collected within a 60-day window. Herzberg represents the 25th District in the Michigan House of Representatives, which encompasses the city of Wayne along with parts of Canton, Dearborn Heights and Westland. He was first elected to the Michigan House in a special election held in April 2024 and was reelected in November 2024. During a March 18 House vote on a Republican bill to lower Michigan's income tax rate from 4.25% to 4.05%, Herzberg joined most of his Democratic colleagues to oppose the legislation. The Democrat-led Michigan Senate has not taken up the proposal. Herzberg did not immediately respond to a voice message left by the Detroit Free Press to comment on the recall effort. Efforts to recall lawmakers have struggled to go from a mere threat to an actual vote in recent years. The year 2011 marked the last time a sitting lawmaker was successfully recalled. Whitmer: Trump promises 'better deal' for Michigan after semiconductor factory falls apart The latest recall effort — inspired by Herzberg's vote to preserve the state's current income tax rate — mirrors previous recall efforts over Democratic lawmakers' tax positions. In 1983, recall elections spurred by a tax revolt marked a historic vote in Michigan with state Sen. Phil Mastin, D-Pontiac, becoming the first state official in Michigan to be kicked out of office in a recall election. State Sen. David Serotkin, D-Macomb Township, soon met the same fate in his recall election the following week. The recall campaigns were led by those who fiercely opposed the Democratic lawmakers' support for a personal income tax hike proposed by then-Gov. James Blanchard. Serotkin resigned before the state's canvassing board certified the results of the recall election. But then-Attorney General Frank Kelley determined that Serotkin could not run for his seat again despite the preemptive resignation. Democrats lost their majority in the state Senate and closed out the year with an even partisan split in the chamber before Republicans took control. Any successful recall election to oust Herzberg wouldn't be expected to have a similar impact on the partisan composition of the Michigan House since he represents a safely Democratic district. Contact Clara Hendrickson: chendrickson@ or 313-296-5743. This article originally appeared on Detroit Free Press: Michigan Democratic state representative faces recall effort Solve the daily Crossword
Yahoo
19-07-2025
- Business
- Yahoo
Tax rises: Freeze on income tax thresholds for millions left on table by Treasury minister Darren Jones
Treasury minister Darren Jones left open the prospect of freezing the thresholds for paying income tax beyond 2028 as the Government scrambles to balance the public finances. He stressed that the policy as of 'today' was not to extend the freeze as pledged by Chancellor Rachel Reeves in the Budget last year. He repeatedly emphasised that Labour's election manifesto promised not to raise the 'headline rates' of income tax, VAT and National Insurance on working people, leaving open the option of further freezing thresholds rather than increasing them in line with inflation. In 2021, then Chancellor, Rishi Sunak announced the income tax personal allowance and higher rate threshold would be frozen from April 2022 until April 2026. The following year, Jeremy Hunt who was now Chancellor announced the freeze would be extended for a further two years until 2028. In the Budget last October, Ms Reeves said the freeze would be lifted from 2028-29. 'Extending the threshold freeze would hurt working people,' she said. But her deputy Mr Jones, Chief Secretary to the Treasury, declined to repeat her promise. 'That is Government policy today,' he told LBC Radio. 'But what I'm not going to do is speculate one way or the other about any form of tax policy.' Earlier, he told Times Radio: 'What our manifesto said is we are going to protect working people by not increasing the headline rates of income tax, VAT or National Insurance.' People start paying the basic rate of income tax once they earn over £12,570 and the higher rate once their income goes above £50,270. London's median full-time salary is £41,866 so many senior health workers, police officers, teachers, and private sector employees are being hit by 'fiscal drag' of the income tax threshold freeze, pulling them into paying the higher rate. Extending the freeze would raise over £38 billion a year in 2029/30, according to the Office for Budget Responsibility. The fiscal watchdog has warned that the UK's state finances are on an 'unsustainable' path due to a raft of public spending promises the Government 'cannot afford' in the longer term. Recently, the revolt by Labour MPs over welfare reforms blew a £5 billion hole in the public finances, on top of the £1 billion cost of the U-turn on winter fuel payment cuts. Ms Reeves has declined to rule out looming tax rises. But Mr Jones said he did not recognise a report that there was now a £20 billion black hole in the public finances. The Government claims it has made economic growth its No1 priority. But Bank of England governor Andrew Bailey says companies had cut jobs and restricted pay rises as they 'adjust' to having to pay the higher National Insurance contributions on employers announced by Ms Reeves. In an interview with The Times, Mr Bailey said he believes the interest rate set by the Bank of England, currently 4.25%, would be lowered in future, after it was held in June.
Times
18-07-2025
- Business
- Times
The new middle-class tax revolt
Hundreds of thousands of savers are making big changes to the way that they make and spend money for one simple reason: tax. Some are cutting the hours they work, while others are turning down promotions, giving their pensions away to family members or even considering leaving the country — all because of frozen tax thresholds and upcoming tax changes. The phenomenon known as fiscal drag — where more people pay more tax as wages increase because tax thresholds remain frozen — means that 6 million more people will pay income tax this tax year than in 2021-22. Almost 7.1 million workers are now in the higher income tax band, up 2.6 million since 2021-22, and the number of additional-rate payers has almost doubled to 1.2 million. Collectively, we're set to pay £298.6 billion in income tax in 2025-26 — an extra £89 billion compared with four years ago, the latest government figures show, and this is set to rise further because income tax thresholds will remain frozen until at least 2028. We're also on track to pay £6 billion in tax on our savings and £18.6 billion on dividends. 'Fiscal drag has had a devastating impact on the tax we pay. These figures show just how much damage is being done to our finances by this horrible stealth tax — and there is plenty more to come,' said Sarah Coles from the investment platform Hargreaves Lansdown. So it's no wonder that some families are shaking up their financial behaviour to avoid bigger tax bills. We spoke to four to find out how. Income tax thresholds have been frozen since 2021, and even those on relatively modest wages are now being dragged into the higher-rate 40 per cent band that is applied to earnings above £50,270 a year. For families this comes with an added sting in the tail because they start to lose their child benefit entitlement not far above this threshold. Child benefit is worth £26.05 a week for the first child and £17.25 a week for other children, but once one parent earns above £60,000 a year of adjusted income, you have to repay 1 per cent for every £200 earned over that threshold. Once one parent earns £80,000 you get nothing. Justin King, 55, a financial planner from Christchurch in Dorset, reduced his working hours to ensure that he was still eligible for child benefit, worth about £2,250 a year for Olivia, 16, and Amy, 14. 'I had the option to work more, but the extra income would have been largely eroded by higher tax and the loss of child benefit. When I weighed it up, it just didn't seem worth missing out on time with my family,' he said. Because eligibility for child benefit is based on adjusted net income — your earnings after pension contributions and certain tax reliefs have been deducted — there are ways you can avoid this trap. Dean Butler from the life insurer Standard Life said: 'Higher earners could consider increasing their pension contributions to reduce their adjusted net income below £80,000. This way you could get some or all of your child benefit back, while also saving for your future.' • Why high earners are cutting their pay (clue: it's about 600% tax) There is evidence that more people are doing exactly this. There has been a steep increase in the number of taxpayers with adjusted earnings that are between £1 and £3,000 below the threshold — almost 1 million, up from 893,000 a year earlier, according to HM Revenue & Customs data. King has started to increase his working hours again now his children are older and the child benefit threshold has been raised — it was £50,000 until April 2024 and went up to £60,000. He said: 'As a financial planner, I often encourage clients to make life choices based on their values, and at that point, family time mattered more to me than extra income. You need to do your sums and work out whether that extra day's work may be more valuable to you and your family than contributing to the Treasury.' Salary sacrifice is another way to reduce your earnings. Offered by some workplaces, it means agreeing to reduce your salary by a certain amount in exchange for extra benefits such as pension contributions. It means you also save on national insurance payments because you 'give up' part of your salary to go into your pension. 'It's important to note, however, that salary sacrifice can harm mortgage applications and reduce payments based on salary, such as maternity pay, so it might not be right for everyone,' Butler said. • How free nursery hours for more children backfired The £100,000 cliff-edge is the most punitive threshold in the UK tax system, with workers in this band facing a marginal tax rate (the amount you pay on the next £1 earned) of 62 per cent. For every £2 you earn above £100,000 you lose £1 of your £12,570 personal allowance (the amount you can earn each year before paying tax), with the allowance cut to nothing by the time you earn £125,140. It gets worse for families: once one parent earns above £100,000 a year in adjusted net income, they are no longer eligible for tax-free childcare (a government-backed savings account for nursery fees worth up to £2,000 a year per child) and they lose entitlement to free childcare hours. Parents with children aged between nine months and two years can get between 15 and 30 hours of childcare funded by the government during term time (rising to 30 for all children aged nine months and up from September). Parents of three and four-year-olds can get 30 free hours. With an average full-time nursery place for a child under two costing £341 a week in England, this can be a vital lifeline. Once you earn more than £100,000 in adjusted net income you lose the free hours for younger children entirely, and only get 15 hours for three and four-year-olds. Emily Farmer, 32, from Hampshire, had always aimed to earn £100,000 in her career in marketing, but since her daughter Olivia was born 11 months ago, she has reduced her working hours because it's simply not worth earning more. 'Reaching £100,000 always felt like a career milestone for me, but after having my daughter and nearing this threshold, I made the strategic decision to move to a four-day week,' Farmer said. 'It's a shame to have to sacrifice career progression to make my family finances work.' Making extra pension contributions can also help workers at this cliff-edge reduce their take-home pay and avoid punitive marginal tax rates, Butler said. 'This could also help you recover some or all of your personal allowance, depending on how much you put in.' Savers can put up to £60,000 a year into a pension, including tax relief, or 100 per cent of their earnings, whichever is lower. This can be particularly valuable when employer contributions are factored in. However, it is important to consider whether you may need the money early because it is not usually possible to get at your pension savings before 55 (rising to 57 from April 2028) without incurring a large tax bill. • I spend £200 a week on summer holiday childcare From April 2027 pensions are set to be included as part of an estate for inheritance tax (IHT) purposes, and this has upended many peoples' financial plans. Defined contribution pensions (when your pot is based on what you pay in plus investment growth) are exempt from inheritance tax, but with this set to change, many savers are rushing to give away their wealth to avoid a 40 per cent IHT bill when they die. The tax is paid on estates worth more than £325,000 (£500,000 if they include a main home left to a direct descendant on estates worth up to £2 million). Couples who are married or in a civil partnership can inherit each other's allowances, meaning up to £1 million can be passed on IHT-free. Just under 5 per cent of estates pay IHT in the UK, but this is expected to rise to 8 per cent after 2027, according to HMRC. Alistair Dickson is concerned that the changes could leave his children with an unwelcome tax bill and is making plans to pass his wealth on as tax-efficiently as possible, including considering putting his house into trust. Dickson, 57, who lives in Glasgow, is also spending more, using his annual gifting allowance, and is even exploring the idea of moving to Portugal, which has a favourable tax set-up. Everyone in the UK can give away up to £3,000 a year and it won't count as part of your estate for IHT purposes. You can also make small gives of up to £250 per person, as long as they also haven't benefited from the £3,000 allowance. It is possible to give away much larger sums IHT-free as long as you live for seven years afterwards, after which the gift will no longer be counted as part of your estate. • Surge in wealthy using insurance to beat inheritance tax hit You can also give away unlimited regular amounts out of surplus income, as long as it does not affect your standard of living and you keep records to show a pattern of giving. The money must come from income such as earnings, rent, pensions or an annuity, and not from savings. Adrian Murphy from the financial advice firm Murphy Wealth said: 'For years it was assumed that pensions would be the last port of call for income in retirement — or might never be touched at all — and most of it would find its way to your children,. But that has now changed. This will only drive more people to give assets away or look at alternative strategies.' Proposed changes to the Isa system are causing more savers to alter their plans. Adults can save up to £20,000 a year into an Isa, in cash or investments, or a mix of both, but it is thought that the chancellor, Rachel Reeves, may slash the cash Isa limit in her October budget, in a bid to encourage more people to invest. The uncertainty could be having the opposite effect. Savers poured a record £14 billion into cash Isas in April, according to the Bank of England. Rob Mack usually invests about £500 a month but has been funnelling any spare money into his cash Isa in case the allowance is cut. Mack, 50, from north London, has saved £5,000 so far this tax year and hopes to use as much of the £20,000 allowance as possible before the budget. 'We've made some adjustments to our family finances, moving savings into cash Isas to keep them accessible and tax-efficient. It's essential to have quick access to funds when unexpected expenses arise, like a car repair or a boiler breakdown,' he said. Murphy is advising clients to use the changes as a starting point to review their investments: 'Cash saving in most cases should be for emergencies and short-term liabilities or expenditure.'
