UK budget: Taxes. Taxes everywhere.

Post by J Newman
Why does the government have to balance the books by raising taxes? Why
not just sack non-jobs, cut bloat, cut the wages of politicians and
civil servants and reduce wastage?

Because it's an easier decision than by cutting pensions and the NHS
which are the largest spends by the Government. I tend to agree that
Government has got too big, but see the uproar when pensioners lost
£200/year, £4/wk, so how is it going to go down when they say your
pension is being cut by £10 a week as we are paying you too much.
The Government has relied on economic growth to pay all of its bills for
the last 50 years, and each new incoming Government has pledged money
for more things, so Government spending is always larger every year.
The last 15 years have been low growth, so spending has gone up, but
income has gone down in proportion.

Cutting wages of civil servants and MPs is a drop in the ocean, though
the MPs dont tend to show any restraint when it comes to their wages and
job entitlements, so reform there would be a popular public decision,
but it wont make any difference to Government finances.

RJH

2024-10-18 06:54:08 UTC

Post by J Newman
Why does the government have to balance the books by raising taxes? Why
not just sack non-jobs, cut bloat, cut the wages of politicians and
civil servants and reduce wastage?
Things like higher CGT on share proceeds punishes people who've earned
the money (already subject to income tax) and then they tax the CG.

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

Post by J Newman
On
top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of your
savings.

Savings have done quite nicely in this last run of inflation. If you have
savings and have not been one of the most affected by high inflation items
(fuel and loans) you've likely done well.

--
Cheers, Rob, Sheffield UK

Norman Wells

2024-10-18 07:24:40 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

But the money put into those investments has already been taxed,
probably as income. And the investments have always been at some risk.
Many end up as capital losses. You don't get any tax repaid to you on
those, so why should gains be taxed?

Post by J Newman
On top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of your
savings.

Savings have done quite nicely in this last run of inflation.

There's no such thing as 'this last run of inflation'. It doesn't come
in runs.

It has admittedly been possible just in the last 4 or 5 months or so to
save money in term accounts with safe building societies that exceed
current rates of inflation and so give you a real return on your money
for the privilege of lending it. For three or four years before that,
during which inflation reached double figures, it certainly was not, and
savers were losing the value of their savings hand over fist year on year.

On top of that, salt was being rubbed into the wound by savings income
being taxed.

Post by RJH
If you have
savings and have not been one of the most affected by high inflation items
(fuel and loans) you've likely done well.

No-one is not affected by fuel prices. Compare your gas and electricity
bills now with those three or four years ago. They've approximately
doubled.

RJH

2024-10-18 12:28:47 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

I don't follow you. The income on capital is a separate issue. And yes, of
course it's likely to be liable to tax - unearned as it is. The discussion was
CGT.

if you want to lobby for compensation for failed investments, fill your boots
:-)

Post by J Newman
On top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of your
savings.

Savings have done quite nicely in this last run of inflation.

There's no such thing as 'this last run of inflation'. It doesn't come
in runs.

Inflation is pretty much cyclical. It goes up, then it goes down. The period
it stays higher or lower is a run.

Post by Norman Wells
It has admittedly been possible just in the last 4 or 5 months or so to
save money in term accounts with safe building societies that exceed
current rates of inflation and so give you a real return on your money
for the privilege of lending it. For three or four years before that,
during which inflation reached double figures, it certainly was not, and
savers were losing the value of their savings hand over fist year on year.
On top of that, salt was being rubbed into the wound by savings income
being taxed.

There's always ISAs and savings interest relief. And for some reason (in that
I didn't put much thought into it, just saved with my building society) my
savings are due to yield a net 4% - 3.75% cash ISA, 4% 2 year bond. So maybe I
wa lucky.

Post by RJH
If you have
savings and have not been one of the most affected by high inflation items
(fuel and loans) you've likely done well.

No-one is not affected by fuel prices. Compare your gas and electricity
bills now with those three or four years ago. They've approximately
doubled.

I haven't been affected - solar/battery, infrequent driver, and parsimonious.
Food and alcohol have been the main items here, and I've just cut my cloth.

I appreciate, of course, it's been worse than hard for many.

--
Cheers, Rob, Sheffield UK

JNugent

2024-10-18 12:40:37 UTC

[ ... ]

What happened to your savings between 2008 and 2022?

Did you manage to match or beat inflation on your savings during that
FOURTEEN YEAR period?

Norman Wells

2024-10-18 15:13:56 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

I don't follow you. The income on capital is a separate issue.

We're not talking about income but capital gains. You have to know the
difference.

Post by RJH
And yes, of
course it's likely to be liable to tax - unearned as it is. The discussion was
CGT.
if you want to lobby for compensation for failed investments, fill your boots
:-)

To make capital gains entails taking the risk of making capital losses.
If there's no incentive to do that, eg by a lower tax rate regime,
everyone would simply put all their money into a building society where
it's safe as houses, and never invest at all in the companies that drive
the economy but may fail.

Post by RJH
Savings have done quite nicely in this last run of inflation.

There's no such thing as 'this last run of inflation'. It doesn't come
in runs.

Inflation is pretty much cyclical. It goes up, then it goes down. The period
it stays higher or lower is a run.

Then you have to define what you mean by 'higher', 'lower' and 'stays',
with a few numbers. Otherwise they're just vague and meaningless.

At the moment, as I say, they unusually represent safe and encouraging
returns because, for a short time at least, they outstrip inflation.
When inflation is running at 10% or so, though, as it has in the recent
past, at such rates you end up with substantially reduced purchasing
power at the end, ie you've lost money on the deal. And that has been
the general case now for several years. They have not been good for
savers; on the contrary they've been very bad.

Post by RJH
If you have
savings and have not been one of the most affected by high inflation items
(fuel and loans) you've likely done well.

No-one is not affected by fuel prices. Compare your gas and electricity
bills now with those three or four years ago. They've approximately
doubled.

I haven't been affected - solar/battery, infrequent driver, and parsimonious.
Food and alcohol have been the main items here, and I've just cut my cloth.

Having to cut your cloth, or anything else, is in fact one of the best
indicators of not doing well.

Handsome Jack

2024-10-18 08:40:41 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it.

You mean like building your business from nothing and then selling it?

Post by RJH
It's a way of taxing wealth, rather than the more
slippery 'income'.

Post by J Newman
On
top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of
your savings.

Savings have done quite nicely in this last run of inflation.

The interest rate was about 1% until a year or two ago. Wow.

Post by RJH
If you
have savings and have not been one of the most affected by high
inflation items (fuel and loans) you've likely done well.

Groceries have gone up by 30% and we've done well?

RJH

2024-10-18 12:16:53 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it.

You mean like building your business from nothing and then selling it?

No, that's literally not what a *capital* gain is.

Post by RJH
It's a way of taxing wealth, rather than the more
slippery 'income'.

Post by J Newman
On
top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of
your savings.

Savings have done quite nicely in this last run of inflation.

The interest rate was about 1% until a year or two ago. Wow.

I don't follow it especially closely, but my savings haved netted 4% over the
past 2 years.

Post by RJH
If you
have savings and have not been one of the most affected by high
inflation items (fuel and loans) you've likely done well.

Groceries have gone up by 30% and we've done well?

Agreed - if you're on very low income, food increases will have been
clobbering.

--
Cheers, Rob, Sheffield UK

JNugent

2024-10-18 12:43:07 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it.

You mean like building your business from nothing and then selling it?

No, that's literally not what a *capital* gain is.

Tell us how and why you don't have to pay CGT on the sale of a business.

Post by Handsome Jack
The interest rate was about 1% until a year or two ago. Wow.

Usually a fair bit less than 10%.

Post by RJH
I don't follow it especially closely, but my savings haved netted 4% over the
past 2 years.

And in the previous fourteen years?

Norman Wells

2024-10-18 14:55:25 UTC

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of
your savings.

Savings have done quite nicely in this last run of inflation.

The interest rate was about 1% until a year or two ago. Wow.

I don't follow it especially closely, but my savings haved netted 4% over the
past 2 years.

Measured by the RPI, inflation over the last two years has been nearly
13% (about 9.1% in 2022-23, plus 3.6% in 2023-24). If your 4% is an
annual figure, your savings will have apparently increased by about 8%
over that time, but including interest are now worth 5% less in terms of
purchasing power than they were 2 years ago.

Tell me again that savings, even yours, have done 'quite nicely'.

Handsome Jack

2024-10-18 16:29:06 UTC

Post by J Newman
Why does the government have to balance the books by raising taxes?
Why not just sack non-jobs, cut bloat, cut the wages of politicians
and civil servants and reduce wastage?
Things like higher CGT on share proceeds punishes people who've
earned the money (already subject to income tax) and then they tax
the CG.

If you've made a capital gain on disposal, you've almost literally
done nothing to earn it.

You mean like building your business from nothing and then selling it?

No, that's literally not what a *capital* gain is.

You are mistaken. Entrepreneurs pay a very significant amount of CGT when
they dispose of the businesses they have built (even allowing for the
existence of entrepreneurs' relief, which HMRC move heaven and earth to
disallow if it can think of an excuse for doing so).

Post by Handsome Jack
Groceries have gone up by 30% and we've done well?

Agreed - if you're on very low income, food increases will have been
clobbering.

It's not just a matter of very low income. If you're retired, even on a
reasonable income, your savings and pension pot have to last you for the
rest of your life. If their value is suddenly reduced in real terms by
30%, that makes a big difference to your financial position.

RJH

2024-10-19 04:27:18 UTC

Post by J Newman
Why does the government have to balance the books by raising taxes?
Why not just sack non-jobs, cut bloat, cut the wages of politicians
and civil servants and reduce wastage?
Things like higher CGT on share proceeds punishes people who've
earned the money (already subject to income tax) and then they tax
the CG.

If you've made a capital gain on disposal, you've almost literally
done nothing to earn it.

You mean like building your business from nothing and then selling it?

No, that's literally not what a *capital* gain is.

Yes, my mistake - I hadn't realised that goodwill etc. was chargeable.

--
Cheers, Rob, Sheffield UK

JNugent

2024-10-18 12:38:23 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it.

Provided that the "gain" (so-called) exceeds the rate of inflation since
the asset was purchased.

If it hasn't, that's a *loss*, not a gain.

Post by RJH
It's a way of taxing wealth, rather than the more slippery
'income'.

Is it?

Post by J Newman
On
top of all this there's VAT, so if you spend the after-tax proceeds the
government gets you again. Plus all the other stealth taxes.

Quite. Indirect taxes account for around 65% of government revenue, and
they're heavily regressive to boot.

The great advantage about "indirect" taxes (which IMHO are just as
direct as any other tax) is that they are much more difficult to avoid
or evade than income taxes (of whatever shade) and National "Insurance" Tax.

Post by J Newman
IMV a 50% tax rate is the government pocketing 50% of your work-hours
effort. Add inflation on top of that which is basically dilution of your
savings.

Savings have done quite nicely in this last run of inflation. If you have
savings and have not been one of the most affected by high inflation items
(fuel and loans) you've likely done well.

What do you say about the period between 2008 and 2023, when savers were
routinely robbed* by the government (in the form of the nationalised
Bank of England which had incompetent management between 2008 and today)
and the banks/building societies, with their losses being passed to
borrowers who were paying less-than-zero rates on mortgages and certain
other loans?

[* Robbed because the rate paid on savings accounts was usually well
under 1% even though inflation was rarely less than 2% and often more.]

Brian

2024-10-25 16:46:08 UTC

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

No necessarily. There are numerous examples of people buying houses is a
state of disrepair / in need of 'modernisation' at a lower price than
they sell it, quite possibly having expended considerable time, effort,
and money (which isn't reclaimable) to improve it an thus improve its
value.

Equally, even if you simply invest in property as an asset there is a
risk it will decrease in value. If CGT is introduced on primary
residences, then allowances for fall in value should be permitted*. That
could 'backfire' - costing the Government, or more exactly the wider
taxpayer pool, money. After all, it seems the VAT on School Fees may
well have backfired - Schools can reclaim VAT paid on building work
going back years, the cost of funding extra teachers in the State
system, ...... not to mention possible legal costs.

*You can currently offset losses against gains in other areas.

JNugent

2024-10-26 15:53:21 UTC

Post by Brian

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

Why do you say that the time, materials and money spent on refurbishment
are not recoverable?

As long as the theoretical per-hour payment for one's own time is
reasonable and also declared to the Revenue (for the calculation of tax
and NI due upon it), there is no reason why it ought not to be allowed
as a "loss" item on the P&L calculation used to determine the capital gain.

The same applies to the cost of all materials used as well as payments
to specialists in tasks like electrical and plumbing work.

Treating the gain as more than it actually is would be a work of fiction.

Post by Brian
Equally, even if you simply invest in property as an asset there is a
risk it will decrease in value. If CGT is introduced on primary
residences, then allowances for fall in value should be permitted*. That
could 'backfire' - costing the Government, or more exactly the wider
taxpayer pool, money. After all, it seems the VAT on School Fees may
well have backfired - Schools can reclaim VAT paid on building work
going back years, the cost of funding extra teachers in the State
system, ...... not to mention possible legal costs.
*You can currently offset losses against gains in other areas.

Vir Campestris

2024-10-26 20:33:55 UTC

Post by Brian

If you've made a capital gain on disposal, you've almost literally done
nothing to earn it. It's a way of taxing wealth, rather than the more slippery
'income'.

No necessarily. There are numerous examples of people buying houses is a
state of disrepair / in need of 'modernisation' at a lower price than
they sell it, quite possibly having expended considerable time, effort,
and money (which isn't reclaimable) to improve it an thus improve its
value.
Equally, even if you simply invest in property as an asset there is a
risk it will decrease in value. If CGT is introduced on primary
residences, then allowances for fall in value should be permitted*. That
could 'backfire' - costing the Government, or more exactly the wider
taxpayer pool, money. After all, it seems the VAT on School Fees may
well have backfired - Schools can reclaim VAT paid on building work
going back years, the cost of funding extra teachers in the State
system, ...... not to mention possible legal costs.
*You can currently offset losses against gains in other areas.

This seems as good a place as any to have a moan.

I'm recently retired, and I've put away some money to live on.

The Tories mismanaged the economy so we had inflation which destroyed a
lump of the value of those savings. Just to add insult to injury the
interest I got - which was less than inflation - counts as taxable
income, which further reduces the value of those savings.

It now sounds as if Labour are going to come for unearned income. I'm
guessing that means the income on my savings. Some are in shares, and I
dares say in their eyes I'm a lousy capitalist and deserve to pay.

I should have spent it all, then claimed the dole.

Andy

Spike

2024-10-18 08:29:42 UTC

Post by J Newman
Why does the government have to balance the books by raising taxes? Why
not just sack non-jobs, cut bloat, cut the wages of politicians and
civil servants and reduce wastage?

[…]

So far under this government the message is ‘don’t be old’ (WFP).

The next ones are likely to be ‘don’t be ill’ (NHS decline) and ‘don’t die’
(IHT increases).

There will be plenty more in the budget, such as ‘don’t buy an EV’ (VED
imposed)(more diesel cars sold last month than EVs).

Labour governments: the equal spreading of misery.

--
Spike

Mark Goodge

2024-10-18 10:57:20 UTC

Post by J Newman
Why does the government have to balance the books by raising taxes? Why
not just sack non-jobs, cut bloat, cut the wages of politicians and
civil servants and reduce wastage?

Which non-jobs do you have in mind, and how much would eliminating them
save? Which waste do you have in mind, and how much would eliminating it
save? And what are the potential unintended consequences of reducing
expenditure?

Reducing the salaries of MPs (who are the only politicians who get wages)
might be popular, but there are not that many of them and reducing their
salary would have a negligable effect on government expenditure.

Cutting the salaries of civil servants would, of course, be a breach of
their employment contracts, and would make it significantly harder to hire
them in future. Given that civil service incompetance and lack of relevant
experience (particlularly in the areas of law, engineering, business,
education and science) is a major complaint of a very large number of
organisations and lobby groups, reducing the number of peanuts is not going
to improve the quality of the monkeys.

That is not, of course, to say there are not savings which could be made.
Raising taxes should not be the default response to a revenue gap; it always
has to be considered along with other options.

A big part of the problem is that people always want the burden of the
government's financial decisions to be borne by someone else. Those calling
for an increase in taxes always want those additional taxes to be paid by
other people. Those calling for cuts in expenditure always want those cuts
to be made in services that they do not use or benefit from.

There should be a rule of thumb, therefore, that if someone calls for an
increase in taxes, they should always be expected to state how much
additional tax they, personally, are willing to pay. And if they are not
willing to do so, their opinion can safely be disregarded.

Equally, when someone calls for cuts to expenditure, they should be expected
to state which services and benefits provided to them by the government
they, personally, are willing to have removed or diminished. And if they are
not willing to do so, their opinion can safely be disregarded.

Mark

JNugent

2024-10-18 13:17:33 UTC