Chancellor to Scrap Pension Tax Relief Changes

A report in The Times suggests that new Chancellor, Angela Reeves looks set to scrap any planned changes to pension tax relief.

It was widely rumoured that a uniform tax relief for all say at 30% rather than 20%, 40% and 45% may come to be (it was the same rumour when George Osborne was Chancellor in 2016 subsequently scrapped after the Brexit vote).

Changing tax relief to a uniform level would be easy for net contributions to perosnal pensions by consumers but not easy at all for ‘net pay’ company pension arrangements, where contributions are deducted from gross pay meaning higher earners would have received full rates of relief at their highest rate and woould then have to pay a tax refund at the end of the year for overclaimed tax relief.

Comment

This is a difficult move which we do expect eventually to make pension saving more attractive to lower earners but will need huge consultation and co-peration with the pensions industry before it could be enacted.

We fuly expect easier routes to raise revenue such as:

• Capital gains tax rates moving to income tax rates rather than 10%/20% for non-residentual property gains and 18%/24% for residential property gains for basic and higher rate tax payers repectively.
• Smaller employers national insurance contribution concessions to disappear.
• Lump sum death benefit allowance (LSDBA) for pensions funds paid on death tax free before age 75 to be reduced from £1,073,100 (less any tax free cash already withdrawn) to say £500,000 or to disappear entirely and be taxable (at normal income tax rates) for beneficiaries from day 1.