Inflation plunging

Don’t you realise that inflation going down only means that the rate at which prices increase is going down, not that the prices themselves are going down?

Overall inflation is falling. I wouldn't use the word plunging, because it isn't.

Inflation falling does not mean that prices are falling. It means that prices are not going up as fast as they were.

Inflation can fall at the same time as someone's Council tax, vehicle tax, home insurance and vehicle tax to name just a few. are rising. All that as happened is that they are not rising as much as they did last year or the yyear before.

The government collect the prices of over 700 products and services to calculate inflation and within that mix there will be items that have rocketted in price - ike car insurance this year -and other items, not necessarily high profile items, that have dropped in price. The final inflation figure is an average figure.

mabon1

So inflation is plunging. All my pension rise has gone on Council tax, vehicle tax, home insurance and vehicle tax to name just a few. How stupid do these politicians think we are.

I imagine for some, that the cost of living has outstripped the pension increase and also put them in the tax bracket to boot.

Win, lose - as opposed to win, win.

However, at least the increase has gone some way towards mitigating price inflation.

I'm already paying tax anyway - but I think my personal cost of living has exceeded the rise. I'm in the fortunate position of being able to make cut-backs (and will), but I do feel sympathy for those who've gained with one hand and are 'giving back' rather more with the other.

Of course the Chancellor honoured the triple-lock to keep the 'grey-vote' on side - knowing full well that it would tip sufficient numbers into paying tax. That's why the personal allowance was not increased.

That's how you manage a budget. Rob Peter to Pay Paul, and when you've paid Paul, take it back off him in some way to give it back to Peter again.

M0nica

Overall inflation is falling. I wouldn't use the word plunging, because it isn't.

Inflation falling does not mean that prices are falling. It means that prices are not going up as fast as they were.

Inflation can fall at the same time as someone's Council tax, vehicle tax, home insurance and vehicle tax to name just a few. are rising. All that as happened is that they are not rising as much as they did last year or the yyear before.

The government collect the prices of over 700 products and services to calculate inflation and within that mix there will be items that have rocketted in price - ike car insurance this year -and other items, not necessarily high profile items, that have dropped in price. The final inflation figure is an average figure.

Good analysis.

Inflation can fall at the same time as someone's Council tax, vehicle tax, home insurance and vehicle tax to name just a few. are rising. All that as happened is that they are not rising as much as they did last year or the yyear before.

And, in fact, that is something to be grateful for. I don't mean grateful to any individual or organisation, just grateful of the fact.

I might add that the politicians do not produce the figures. They are produced by the ONS, Office of National Statistics, staffed by statisticians, actuaries and mathematicians, who work to meticulous rules.

Politicians claim ownership of these figures when they work to their advantage and reject them when they don't.

Yes, Monica, politicians are good at twisting things. When inflation was very high it was a "global phenomenon" but now Rishi Sunak claims that HE has managed to reduce it. His plan is working.

Greta

Yes, Monica, politicians are good at twisting things. When inflation was very high it was a "global phenomenon" but now Rishi Sunak claims that HE has managed to reduce it. His plan is working.

Yes, I noticed that too

They think we're stupid. My work pension went down this month- due to tax increase I was told.

State pension rise is paid in arrears- so I'm having to pay for a tax rise on money I have not yet received.

The increase in my SP will be cancelled out by the tax increase on my WP. No rise in living standards for me after 50 years of working. Great.

I'm not sure that's right, keepingquiet, unless you owe tax from last year and they are taking it off monthly.

The personal allowance has remained the same.

Personal Allowance: 0% tax on earnings up to £12,570.
Basic Rate: 20% tax on earnings between £12,571 and £50,270.
Higher Rate: 40% tax on earnings between £50,271 and £125,140.
Additional Rate: 45% tax on earnings over £125,140.

I rang my work pension- they told me it was a tax issue- the tax people said it was DWP who said it was National Insurance. I was on the phone the whole morning and in the end deduced it must be due to the budget, which came out after I received my new tax code. Therefore I will be getting a new tax code and maybe, maybe? a refund.
Meanwhile I am a significant amount of money short of my income this month.
According to your figures I am just over the the basic rate of tax.
I don't wish to be specific about my financial matters here but wonder if this has happened to anyone else?

As you are ‘just over’ the basic tax band, presumably you have just slipped into the higher rate and are therefore paying more tax than previously. Not due to the budget but due to an increase in your income.

Yes, keepingquiet, it’s affected approximately 650,000 additional pensioners this year, more are being pushed into income bands where tax is payable year on year, one of the major reasons is the failure to raise the personal allowance.
This article from the Financial Times is helpful in understanding, pensioners are the biggest losers in the latest budget.
www.ft.com/content/d181dc01-dd75-40f5-a3b4-c7d09883e4ad

keepingquiet if you are receiving a state pension you will not be paying National Insurance, so NI changes to your income.

As far as I know there were no changes to taxation in the budget that should change your tax code.

All that happened that directly affects everyone is that the Chancellor did not increase the minimum income level at which you begin to pay tax.

As things stand no one pays any tax on the first £12,570 of their income. If your income is below that you will pay no income tax at all. You then pay 20p in the £ on the next £37,500 of income.

The personal tax allowance used to be increased every year in line with inflation, but this government has not been doing this and doesn't plan to do this for the next 4 years.

I will try to give a simple example of how this works. Let us say that last year your income was the same as the personal tax allowance, £12,570. If inflation was 10% then this figure should also go up by 10% (12,570 + 1257) to £13,827. It would mean that if your income went up by 10%, you would pay no more tax because your income was still no higher than the personal tax allowance.

However, what is happened is that the government has refused to raise the personal tax allowance so that it remains at £12,570, so if you get any extra money this year - like the rise in the state pension, you will have to pay tax on it.

So keepingquiet your monthly tax bill will have increased because you are now paying tax on any increase in income you have received since 5 April.

The basic state pension went up from £156.20 to £169.50. An increase of £13.30 a week. If your total income is above £12,570 that £13.30 will be taxed at 20%, which equals £2.60 a week, £10.40 a month, plus a similar tax on any extra income from any kind of work or personal pension.

there will be no change in your tax code.

Germanshepherdsmum

As you are ‘just over’ the basic tax band, presumably you have just slipped into the higher rate and are therefore paying more tax than previously. Not due to the budget but due to an increase in your income.

If keepingquiet is only just over the basic rate of tax then she shouldn't be anywhere near the next tax band which starts at £50,271.

It sounds as if there is something wrong with the calculation but they need to sort it out quickly and not leave people short of money.

The basic state pension went up from £156.20 to £169.50
Not everyone is on thst, of course.

Some people might not have sufficient years for the full old basic SP and others might be on the new, very much higher, SP.

I read being ‘just over’ basic rate as being just into higher rate.

Ah, I see, I think she means just into the basic rate!

My mistake.

Callistemon Everyone's pension varies. In a reply here I could not possibly list every variation in pensions people might get as they can be anything from a few pounds to over £200 a week, and vary penny by penny.

It seemed sensible to just take one figure, one oft quoted, of the old basic pension. which I think is still the most common state pension for those over 70. I was giving a general example, not trying to provide an answer of an individual case.

keepingquiet The state pension is not itself taxed directly. However if the sum of your state and private pension put you into a tax paying bracket, then all the tax you pay will be deducted from your private pension.

So let us say your state pension went from £8,000 last year to £8,800 this year and your private pension went from £6, 000 to £6600. Your annual pension went up from £14,000 to £15,400 and the amount you pay tax on goes up from £1430(14,000-12570) to £2830 (15,400-12570). At 20% tax, your tax payable last year was £283, this year it will be £566, arise of £283, the equivalent of £23.50 more tax each month, approx.

All the tax due will come from your private pension only and could mean that your 'takehome' pay from your private pension drops.

Germanshepherdsmum

I read being ‘just over’ basic rate as being just into higher rate.

Thankyou for your replies. I am still finding this a bit of a minefield, but I also find it quite frustrating that the pension rise is paid in arrears, but the tax is taken in advance. It was ever thus I suppose.

Also I'm not earning nearly as much from my pensions as I was when working. Only just in the basic rate if that!
Infact one of the people I spoke to, maybe the tax office, said I wasn't earning enough to pay any tax- so there you go.
I really can't be bothered.

I'll probably be back on to them when my pension comes in next months, and yes MOnica, my tax code will be changing again. I think it is because I didn't leave my job until June last year.

M0nica

Callistemon Everyone's pension varies. In a reply here I could not possibly list every variation in pensions people might get as they can be anything from a few pounds to over £200 a week, and vary penny by penny.

It seemed sensible to just take one figure, one oft quoted, of the old basic pension. which I think is still the most common state pension for those over 70. I was giving a general example, not trying to provide an answer of an individual case.

Yes, and your explanation was very good, M0nica

It was just an addendum in case keepingquiet was on the old SP.

It was just an addendum in case keepingquiet was on the old SP.

Which I've realised she is not!

Thankyou for your replies. I am still finding this a bit of a minefield, but I also find it quite frustrating that the pension rise is paid in arrears, but the tax is taken in advance. It was ever thus I suppose

I'm not sure I understand that. The pension rise is usually from just after April 6th for State and works pensions.

You should receive a statement from your works pension provider telling you what your gross monthly amount will be, how much tax and any other deductions will be each month and the net amount of pension.

I'll probably be back on to them when my pension comes in next months, and yes MOnica, my tax code will be changing again. I think it is because I didn't leave my job until June last year.
You might get a tax refund 🙂

My tax code changed recently because the bank notified HMRC about the interest earned on my non-ISA savings account during the past financial year. Instead of being deducted at the bank, the tax due is paid in arrears in the form of an extra amount deducted from this year's monthly private pension payments. I think, if you prefer, there's an option to pay the tax arrears as a one-off lump sum.

I wonder if this is what caused the change in KQ's tax code? If so, HMRC staff should have been able to explain it to her when she called.