Wednesday, 18 April 2012

LOSING EMPLOYMENT & SUPPORT ALLOWANCE


About 100,000 ill and disabled people will lose their Employment and Support Allowance on 30 April 2012.

From that date a new time limit will apply to the Employment and Support Allowance which is paid on the basis of National Insurance contributions. It is called contributory ESA. At the moment it can be paid indefinitely. In future the allowance, worth £99.15 a week, will stop after one year.

The one year time limit will apply at once to an estimated 100,000 people who have already been on contributory ESA for at least a year. Another 100,000 will lose it by April 2013.

The number affected will grow by about 200,000 a year. By 2015/16 a total of 700,000 people on contributory ESA will have lost it when they reached the one year time limit. The Government estimates the net savings to the Treasury will be £1 billion in 2014/15.

More detail
Employment and Support Allowance is paid to people who are too ill or disabled to work. It was introduced in October 2008 to replace Incapacity Benefit. Everyone on Incapacity Benefit is being reassessed and put into one of two ESA groups.

The time limit applies to people in what is called the Work Related Activity Group (WRAG). They have been assessed as able to return to work with some help. The time limit does NOT apply to those in the Support Group who are not expected to return to work because their condition is long-term and severe.

The time limit applies to ESA which is based on National Insurance contributions (contributory ESA). It does NOT affect the means-tested (income-related) ESA paid to those with a low income.

The time limit includes the 13 weeks spent in the assessment phase at the start of the claim for ESA when people are allocated to the work group or the support group.

Can you get money from other sources?
If you are due to lose ESA you should have been sent a letter by the DWP. It is very important to check if you can replace at least some of the ESA you will lose.

1. Can you claim income-related ESA? That is based on your income and savings and if you have a partner on theirs as well. You cannot get income related ESA if your partner works more than 24 hours a week or if their income is too high or your joint savings are more than £16,000. The Government estimates that 60% of those who lose contributory ESA will be able to get at least some income-related ESA. Income-related ESA has no time limit. If you get income-related ESA you may be able to get some help with mortgage payments.

2. Can you get your council tax reduced through Council Tax Benefit? If you pay rent can you get that reduced through Housing Benefit? If you already get either of those benefits they should go up when your ESA goes and your income is reduced. But that will only happen if you tell the council which pays them about your drop in income.

3. Can your partner get Working Tax Credit? If you have no children your partner must normally work at least 30 hours a week to get Working Tax Credit. But if they are over 60 or qualify for disability element that is just 16 hours a week. If you have children then your partner must normally work at least 24 hours a week (assuming you do not work at all). But that may be reduced to 16 hours for a variety of reasons including your own health. Get advice. If your partner already gets tax credits make sure you report your reduced income when ESA stops. Your partner's tax credit should then increase.

The Government estimates that claiming extra from these other benefits will reduce the average loss for those who lose from the full £99.15 a week to about £52 a week.

Where to get help
You can get help and advice from your local Citizen's Advice Bureau. Your local council may have a welfare rights office, though these have been cut back recently. You can also enquire at your local JobCentrePlus. Or you can work out your own entitlement at www.entitledto.com. That takes you to the website of  www.turn2us.org.uk and you can call them on 0808 802 200. The organisation Disability Rights UK may be able to help through its website or publications www.disabilityrightsuk.org/about.htm

The Government published some information on the impact of the Welfare Reform Act on disabled people which you can find through this page www.dwp.gov.uk/policy/disability/welfare-reform-bill-2011-and-disabled. Many of the figures in this blog are taken from the estimates in those documents.

Monday, 16 April 2012

TREASURY INCOME TAX FIGURES - UPDATED

These are the figures the UK Treasury gave to the press 15/16 April 2012.

Table 1
Proportion of individuals reporting various average tax rates by total income category (2010-11)
                                              Income 
£100k to £150k £150k to £250k £250k to £500k £500k to £1m £1m to £5m £5m to £10m Over £10m
Average tax rates
Above 40% 0% 6% 73% 81% 80% 81% 72%
30% to 40% 67% 77% 18% 11% 10% 8% 12%
20% to 30% 24% 13% 5% 4% 5% 4% 8%
10% to 20% 8% 3% 2% 2% 2% 3% 3%
Under 10% 1% 2% 2% 2% 3% 4% 6%








Source: Treasury/HMRC

HM Treasury spokesman: “There are currently millionaires paying a lower tax rate than ordinary taxpayers.  This is the system we have at the moment, but the Government is committed to making it fairer.  We’re capping benefits and these figures clearly show why it’s fair to cap tax reliefs for the wealthy as well.”
_________________________________________________________________________


MY ANALYSIS
The table shows the percentage of people paying the rate of tax in the left hand column for income across the top.
The Treasury table above includes only Income Tax not Capital Gains Tax nor National Insurance
The Treasury table shows average tax rate across all income, not marginal rate.

The 50% tax rate on incomes over £150,000 began in 2010/11.

I have worked out the percentage in Income Tax and NI due on these levels of taxable income if no avoidance was undertaken. So these are the rates that 'should' be paid.

Table 2
Full tax on taxable income of

Source:      £100k      £150k         £250k      £500k      £1m     £5m        £10m
Earnings 29.9% 35.0% 41.0% 45.5% 47.8% 49.6% 49.8%
Dividends 16.6% 20.5% 26.7% 31.4% 33.8% 35.6% 35.9%
Source: Paul Lewis using UK Tax Tool 2012 app and uktaxcalculators.co.uk









You will see that the percentage of income paid in tax is very different if it is solely from dividends. The rows in the Treasury table where people could be said to be avoiding tax are the bottom three. The top row are paying about their full whack and row four may or may not be depending on dividend/earnings ratio.

The numbers of individual taxpayers in the various bands - calculated by me from the Treasury figures - are shown in Table 3 below

Table 3


Number of individuals (2) reporting various average tax rates by total income category 
 Income 2010/11   
£100k to £150k£150k to £250k£250k to £500k£500k to £1m£1m to £5m£5m to £10mOver £10mTotal (3)
Average tax rates
 Above 40%              -      10,200    51,100    20,250     8,000        324            144     90,000
 30% to 40%   201,000  130,900    12,600      2,750     1,000          32              24   348,300
 20% to 30%     72,000    22,100      3,500      1,000        500          16              16     99,100
 10% to 20%     24,000      5,100      1,400          500        200          12                6     31,200
 Under 10%       3,000      3,400      1,400          500        300          16              12       8,600
Total (1)  300,000  170,000    70,000    25,000  10,000        400            200 
(1) Treasury says these figures are approximate as all selfassessment returns are not in yet
and it stresses that the numbers at top incomes are very low and subject to error
(2) My calculations in the table are particularly liable to inaccuracy at the top end
(3) Rounded to nearest hundred
(4) totals do not cross match because of approximations in percentages and totals


These figures show there are 8,600 people with incomes of £100,000 or more paying less than 10% tax and 31,200 paying 10% to 20%. They cannot be paying the full rate of tax on all their income.

Another 99,100 paying 20% to 30% are unlikely to be paying tax on all their income.

The 348,300 paying 30% to 40% and the 90,000 paying above 40% are likely to be paying tax on almost all or all their income depending on the proportion of dividends and earnings in their income.

The Budget papers showed capping several tax reliefs at 25% of income or £50,000 whichever the higher would save the Treasury £490m in 2014/15, £240m in 2015/16 and £300m in 2016/17. Treasury Secretary David Gauke said on 16 April on Today on Radio 4 that the charity tax relief would account for "£50m-£100m" of the 2016/17 saving.

The Treasury wouldn't be drawn on what change the cap would make on the percentages of taxpayers paying various rates, but told me "The cap should mean people move up the rows."


Wednesday, 11 April 2012

WINE INVESTMENT – BORDEAUXING ON THE RIDICULOUS


It all started with the pun in the title. Here is the timeline of how my tweeps responded to it.


Paul Lewis @paullewismoney  Wine investment - Bordeauxing on the ridiculous.

Michael Ware  @HorusConsulting
good pun

Paul Lewis @paullewismoney 
“@HorusConsulting: @paullewismoney good pun” >>> it's not a pun, it's financial advice!!!

Bee Chandler @mummyyummy34  
you're on top form tonight! #cheers

Paul Lewis @paullewismoney 
@mummyyummy34 >>> cheesy but with a hint of oak and blueberries over notes of grass?

Quizzical Eyebrow @quizeye  Can somebody tell @paullewismoney that Tim Vine has hacked his twitter account please?

JSA+Expenses @JSAplusExpenses 
wine investment>>>investors chablis treated

Andrew Hill @AndrewJ_Hill 
Sadly the web has yet to find a way to succinctly express a sigh, shake of the head and roll of the eyes after a poor joke.

Stuart Walker @WalkerSah 
Investors end up in Hock?

Odysseus @headedforhades
corking advice at that! #badoomtish

De Bere Yendor @debere71 “@paullewismoney: Wine investment - Bordeauxing on the ridiculous.” A "corking" joke Sir !

De Bere Yendor @debere71 
One needs a lot of bottle to invest in wine !!

Neil Monk  @nm_uk *groan* Taxi for Lewis! RT @paullewismoney Wine investment - Bordeauxing on the ridiculous.

Computer Solutions @KenilworthComps 
Oh that's very good or even Bordeauxing on the Reisling

James Jones @ExperianJames 
Invest in wine and the future has to be rosé.

Jon Cundall @jon_g_c
regarding wine investment - you will get your money back merlot less

CB @thistoomustpass
wine investments, whether good or bad....Que Syrah Syrah

EmJ @Scooty413 
without a top - cabriolet sauvignon?

rightproperty.com @rightproperty 
that's a poor wine investment joke. How Merlot can your followers go?

Stuart Hill @sturtle1 
Are wine investors 'plonkers' ?

Paul Lockett @plc69 
Oh, stop w(h)ining!! ;-)

karen hobbs @karenhobbs 
it's all in the disulphide bonds!

Grant Salisbury @GrantSalisbury1 
What does Jeremy VINE think about it all?

I thought about investing in wine but my bottle went.

Optimum Otium @Optimum_Otium 
Major concern is that of liquidity...

Greg Fradd @fredgruff 
Sauvignon pennies for rainy day.
Look after the Pinots and the pounds will look after themselves. 

Robin Hames @robinhames 
bit late on this one! But presumably you'd have to be off your Rioja to invest.
Still any port in a storm for some.

So, it’s up to you. But remember…

…it's not a pun, it's financial advice!!!

These investments – and this page – are not regulated by the Financial Services Authority and any loss of humour is not covered by the Financial Services Compensation Scheme.

GRANNY TAX II



Imposing the Pay As You Earn (PAYE) tax collection system on the state pension – an Easter idea floated by the Treasury – could  be a disaster.

Not just because it would combine the communication and administrative talents of DWP and HMRC – a toxic mix if every there was one.

But because PAYE is least able to cope when income changes during the tax year and when there is more than one source of income.

Which is exactly what happens at retirement and after.

PAYE is a way of collecting tax not assessing it. That is why every year millions of tax codes are wrong, too little or too much tax is deducted, and HM Revenue & Customs has to write to those taxpayers asking them to send more money or enclosing a refund cheque - or sometimes both.

PAYE works well when people have a single smooth regular income. That is not the common experience in retirement. Eight out of ten older taxpayers have multiple sources of income.(1)

There is no longer one retirement age. People move from full time work to part-time, pensions kick in at different ages, and the state pension arrives at a date that is set to rise to 68 or beyond.

As retirement takes hold some taxpayers move to incomes too low to pay tax. Others who have not worked for some time will find the state pension is their first taxable source of income for years. Many will acquire a second, third or fourth source of income as pensions kick in and perhaps part-time work is started. 

All those changes may happen over several tax years. And they are exactly the conditions which baffle PAYE and lead to under- and over-payments of tax followed by recovery or repayment, often years later.

It may not matter too much to someone in a well paid job if they suddenly get a demand for hundreds of pounds tax. It certainly will matter to someone on an income of £12,000 a year.

MPs reported in February 2010 that an estimated 1.5 million older people had overpaid £250 million of tax on their personal and company pensions and half a million had underpaid £100 million. (1)

Why extend those problems to the state pension as well?