Category Archives: VAT

Pensioners Pay 30% Of Retirement Income As Tax

The money goes in income tax, VAT on goods and services and council tax, according to the study.

Losing nearly a third of expected pension income can make a big dent in a pensioner’s spending power.

On average, reckons the Pru, most households pick up around £21,300 a year gross – before tax – in retirement, and end up with £14,900 to spend after tax.

Income tax and council tax are direct taxes which pensioners have no control over – but they can pay less VAT by spending less or dealing with traders not registered for the tax.

Stan Russell, retirement income expert at Prudential, said: “Giving up work is optional, but paying tax is not. People will stay pay tax in their retirement, even if they pay no income tax, they will lose money in indirect taxes like VAT.”
Pension changes and tax

The financial firm calculated 8% of average pension income goes in income tax and VAT, 4% in council tax and 10% in excise duties for cars, wines, beers and spirits, cigarettes and fuel.

The Pru also explained that pension changes proposed by Chancellor George Osborne allowing retirees easier access to their pension funds from April 2015 will also affect the taxes they pay.

“These changes could change the amount of income tax and VAT paid. More choice could mean more tax, depending on how the money is spent or invested,” said Russell.
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Our comment: so we aren’t getting bus passes for free.

VAT on equipment for the disabled

Disabled people do not have to pay VAT when they buy equipment that has been designed solely for disabled people, or on the adaptation of equipment so they can use it.
We give here information on this topic issued by the Government, more detail is available via the link at the bottom of the page.

Some examples of products that are zero-rated for VAT are:
• Wheelchairs,
• some medical and surgical appliances – like artificial limbs,
• electrically or mechanically adjustable beds
• chair or stair lifts
• computer software or hardware designed specifically for disabled people
• gadgets and devices that are designed solely to make everyday tasks easier for disabled people, like kettle tippers
• vehicles that have been adapted for use by a disabled wheelchair or stretcher user

Also, VAT is not charged on certain services provided to disabled people, including some building work to adapt a disabled person’s home and the hire of disability equipment like wheelchairs.

Goods and services on which you do not have to pay VAT are often referred to as ‘zero-rated’ or ‘eligible for VAT relief’.

How VAT reliefs work

Before you pay for any product or service, check that it qualifies for zero-rating and that the supplier is registered for VAT.

When you buy a zero-rated product or service, you may have to sign a form declaring that you have a chronic illness or disability and what it is. You must also declare that the product or service is for your own ‘personal or domestic use’. The supplier should have copies of this form.

You can then buy the product or service at a price that excludes VAT. You do not have to pay VAT and then reclaim it from the government – it will be taken off the purchase price before you pay.

The rules about VAT reliefs for disabled people are complex. Not everything that is supplied to disabled people is zero-rated for VAT.Read more

Have you had any problems in getting VAT Exemption ? If so we would like to hear about it.

So much emphasis on cuts and so little on growth

Every day brings a new slant on what some see as the urgent need to scrap benefits such as Winter Fuel Allowance, Free Prescriptions, Bus Passes, and regrets from members of the coalition government that so firm a commitment to preserving benefits for the elderly and disabled were made at the last general election. We have put forward ideas for bringing the payment of Winter Fuel Allowance in line with State Pensions by taxing the allowance.

We are very concerned however that each of these measures which will reduce spending power yet further in the economy is in itself self defeating, since government income from VAT and business profits will be brought down further, unemployment levels will rise (and employment benefits rise) so increasing the deficit – all with the opposite effect to that which the Government is said to be trying to achieve.

The UK badly needs an alternative approach based on growing the economy, and reducing the deficit , not deflating it. Are politicians out there listening ?

Tip for the Chancellor: Increase Winter Fuel Allowance and tax it !

Wealthy people aged 60 or over receive the Winter  Fuel Allowance of £200 without any liability to tax – this is frequently commented upon,  and is much more of an issue than bus passes since wealthy people don’t often use service buses,  and the bus companies are paid for bus pass sue on the basis of the number of journeys.

If the chancellor took the imaginative step of increasing the amount next winter to £250, and arranging for the WFA to be paid as part of State Pensions,  (bearing in mind that State Pension is taxable) the following would be achieved:

  • A pensioner whose only income was the State Pension, (circa £5700 per year) would get an increase of £50 to £250
  • A pensioner with total income of up to £10,500 p.a. would also receive an increase of £50 to £250
  • A pensioner with total income of up to £41,450 p.a. would receive the same net amount as before.  (£250 taxed at @ 20% leaves £200 net)
  • A pensioner with income between £41451 and £150,000 would receive a net £150  (£250 taxed at @ 40% leaves £150 net)  i.e. £50 less than the current £200 allowance.
  • A pensioner with income above £150,000 would receive a net £137.50  (£250 taxed at @ 45% leaves £137.50 net) )  i.e. £62.50 less than the current £200 allowance.

We don’t have the technology to work out the impact of this to the Exchequer,  but it would help those who need the cash most, and maybe save an awful lot of moaning about the WFA,  and one can assume that those who received a net increase would be pretty certain to spend it,  so there’s 20% in VAT back in the Chancellor’s pocket right away.

What about VAT tax avoidance by multi-national companies?

We have heard a lot about international companies avoiding paying corporation tax, but surely the focus should also be put on companies trading in this country but using an overseas base to charge VAT. A major search engine company’s advertising bills are invoiced from Ireland, and a major website used by millions for selling goods online makes their charges from an address in Luxembourg,where VAT at 15% is lower than the UK.

The loss to the government’s coffers would pay for the cost of bus passes many times over.

Read more

Government’s cuts will reduce pensioner incomes by an average of £240 this year & £367 next

Figures just released by the Institute for Fiscal Studies (IFS) are yet more bad news for pensioners. They show that the Government’s deficit reduction measures will reduce pensioner incomes by an average of £240 this year (around £5 a week) and by a further £367 (£7 a week) in 2012.

Pensioners have already been hit hard by the recent economic crisis. They are suffering the double blow of extremely low interest rates and very high inflation, which means that the value of their savings is being eroded, as the income they receive is less than the inflation rate they face.

This is compounded by the latest rise in VAT, on top of further pain due to rising food, clothing, petrol and heating bills.Ultra low interest rates have also hit annuity rates hard, so recent retirees will receive a much lower pension for the rest of their life.

How much pain do pensioners have to endure? The next blow will be benefit cuts, which will reduce payments to the poorest pensioners. Even people not yet retired will suffer as the state pension age rises.

Read more in The telegraph

‘Increase in VAT will hit pensioners hard’ – paying at least £106 more in VAT than they will receive from other changes

BOLTON pensioners will pay out more than £100 extra per year because of the recent increase in VAT, a local MP has claimed.

David Crausby, MP for Bolton North East, has raised concerns about the effect of the recent Value Added Tax increase on the welfare of pensioners.

From January 4, VAT increased from 17.5 per cent to 20 per cent.

According to a new analysis of the Government’s plans for this year, pensioner households will be paying at least £106 more in VAT than they will receive from other changes, such as a proposed increase in heating payments.

Read more in the Bolton News