Times Money has teamed up with Grant Thornton, the accountancy firm, to answer your questions about the Pre-Budget Report.
If you want to know how the PBR will affect you, send your questions to budgetquestions@thetimes.co.uk . (Please include all the necessary financial information for the accountants to be able to give an accurate answer).
Due to the high number of e-mails we receive we cannot promise to answer all questions.
The bankers’ bonus tax is 50 per cent on any bonus over £25,000. Will the bonus be taxed (i) in the hands of the bank as bonus windfall tax and (ii) in the hands of the banker as income tax?
Dan, London
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The pre-budget report introduces a one-off bank payroll tax of 50 per cent on any individual discretionary bonuses over £25,000 in the period from Pre-Budget Report to 5 April 2010. This period may be extended so that the tax remains in place until the Financial Services Bill comes into force. The tax will need to be paid by August 31 2010 and will not be deductible in computing the taxable profits of the company. This tax will be paid by the bank and not the employee.
Can you please tell me when the boiler scrappage scheme will be available?
Julie
The Government is currently working with industry to provide a £400 incentive scheme that will be available at the earliest opportunity in 2010.
I am currently a higher rate tax payer who will be made redundant during the next financial year. How will the new budget affect my position?
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Charlotte
The Pre-Budget Report does not show any change in the provisions for redundancy. The first £30,000 of your redundancy payment may be exempt to income tax. Any other payments will be taxed within the normal income tax rules. Anything else you receive that is not money will be converted into a cash value for tax and NIC purposes. However the specific circumstances of your situation will determine the tax treatment of these amounts and the £30,000 tax free limit. Professional advice would be advisable.
How will the Chancellor define a Bank in his tax grab?
BL
The definition of a bank includes companies such as banks and building societies taking deposits and advancing mortgages, but also includes other regulated businesses which deal in investments.
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Were there any changes in the Pre-Budget Report to the taxation of Non Domiciles? Can you also e-mail me summary of the main changes?
Rose
Some inheritance tax planning loopholes which were used by non-domiciled individuals have been closed, but there were no significant changes to the taxation of income or capital gains.
A summary of the main changes can be found at www.budgetcomment.com
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I see that there will be a cap on the amount paid from local govt into pension schemes. I am a Fireman and approx half of my contributions come from local govt. Do you know what level the cap will be and its affect on a pension like mine?
Matt Trinder
There will be a cap on contributions to Local Government, NHS, Teachers and Civil Service pension schemes. There is no detail yet on what this cap will be, but the Chancellor has indicated that those earning over £100,000 will “pay more”, and the measures are expected to raise £1bn per annum
Does the pre budget report mean that the pensions of teachers who are already retired will be reduced? I have read the words but the meaning is unclear.
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A worried retired teacher
Retired individuals already receiving a teachers pension will not be affected by the pension capping regulations.
I am retired and in receipt of a police pension, but not a state pension. Do the pension measures mean that my pension will be affected?
Pete Aris
Retired individuals already receiving a police pension will not be affected by the pension capping regulations.
In his speech Mr. Darling said that the one off levy on bonuses would have to be paid by the banks rather than the individuals themselves. Does this mean that the individual receives his or her full (taxed) remuneration and then the bank has to pay an additional 50 per cent of that in tax, i.e. paying 150 per cent of what they had intended? Otherwise I can’t see how declaring that the bank has to pay harms the banks more than they had anticipated in paying out the bonuses anyway unless the employees receiving the remuneration aren’t required to pay any tax.
Nick Spiller
The banks will be charged an additional tax levy of 50 per cent on the gross amounts of any bonuses paid to employees above £25k from today until 5 April 2009. The bank will also not receive a corporation tax deduction for the additional bonus tax being paid, therefore the overall cost will in fact be even greater than a 150 per cent increase in overall net costs to the bank on amounts above £25k, depending on it’s taxable profits in the year.
The bank payroll levy will not impact the tax the employee pays, however as the impact on banks is so great, it will certainly influence their decision when paying any bonuses above £25k in the period.
Can you confirm whether or not the Chancellor has changed the rent a room allowance, currently £4250 per annum?
Sian Wyatt
We can confirm the Chancellor has not changed the rent a room allowance for income tax purposes. The first £4,250 of gross income received will be tax free, subject to the normal conditions.
Do I have to pay increased NI contributions on the drawdown payment that I take from my SIPP - I do not have any paid employment?
PJB
Drawdown payments from Self Invested Pension Plans are taxable for the purposes of Income tax, however national insurance should not be charged. Therefore the increased NI contributions will have no affect on the drawdown payment.
Am I correct in thinking the new bonus tax is in effect a 70 per cent tax on bonuses, assuming the bonus pool remains the same and all bonuses are greater than 25k?
Alison, London
The new tax imposes a 50 per cent payroll tax charge on the employer on any individual discretionary bonuses over £25,000 between 9 December 2009 and 5 April 2010. Any contractual bonuses will be unaffected by the regime. As the charge is borne by the employer there will be no direct effect on an employees take home figure.
There will only be an indirect effect on the employee’s take home figure, if the employer chooses to deduct the expense from the bonus pool. Using an example of a bonus or £100,000 to illustrate this point: the employer would suffer a 50 per cent charge on the excess over £25,000, in this example £37,500. lf the employer does choose to deduct this expense from the bonus pool, the individual would be left with a bonus of £62,500 before tax at 40 per cent of £25,000. The employee would therefore have a net take home £37,500 an effective tax rate of 62.5 per cent out of the total £100,000. An employer may in fact reduce the bonus pool further, as no corporation tax relief is available for the £50,000, therefore increasing the effective cost.
These calculations do not include national insurance contributions and assume the individuals are higher rate taxpayers. The effective rate of tax would change proportionally subject to the circumstances of the individual.
Does the £178 bn Public sector debt figure for this year include the ‘Investments’ made in Lloyds and RBS, if not, how was this financed?
John , London
The 2009 budget estimated the potential loss from financial interventions might lie between £20-50 bn. The large range was given due to the uncertainty of the interventions at that point. The actual cost will be known when the assets are sold on. Taking market data, the current cost is approximately £14bn. The £178bn does take into account a provision for this cost.
For more information on this subject see Annex B of the pre-budget report
The published answers are for general guidance only and do not constitute financial advice. If you want specific advice please contact a financial advisor.