You are here

High earners to lose pension tax relief

The earliest the changes could realistically take effect is April 2017

18 January 2016

Add comment

The Chancellor of the Exchequer, George Osborne, could scrap the favourable pension tax treatment given to higher earners by introducing a universal pension tax relief.

A new flat-rate, thought to be in the region of 25 to 33 per cent, could apply to all savers, in plans to be announced in the March Budget later this year, according to the Telegraph newspaper.

Currently savers receive pension tax relief which mirrors their income tax contribution, which can be 45, 40 or 20 per cent.

The move, if confirmed, would realign a pension tax relief landscape that currently sees basic rate tax payers making half of the total pension contributions, but only benefiting from 30 per cent of pension tax relief.

Similarly with the chancellor's previous overhauls of the pension system, the changes are unlikely to take effect immediately after they are announced - they are expected to come into effect in April 2017.

The government launched a consultation into pensions tax relief in July 2015, which closed in September 2015. The outcome of the consultation is yet to be published.

The mooted flat-rate tax relief is thought to be a product from the government's findings in the above consultation.

Another option which has been pitched but is yet to be seriously considered by the chancellor is that of a 'Pension ISA'.

There has been nothing to suggest that this will change now, but it could feature in some guise by the time the budget is delivered on 16 March 2016.

 

Categorised in:

Pensions Tax & Wealth structuring