Millions of Brits risk losing as much as £2,500 a year under pension tax changes that Boris Johnson‘s Government is reportedly considering.
Former pensions minister Steve Webb has warned that taking away higher taxpayers’ 40 per cent relief would cause “massive disruptions” for the next generation of retirees.
At present, over four million taxpayers pay the higher rate of income tax of 40 per cent, which is applied to incomes of between £50,001 and £150,000, the Government website explains.
People in that bracket currently enjoy 40 tax relief on pension contributions, while taxpayers paying the basic rate of of income tax, 20 per cent – on incomes ranging from £12,501 to £50,000 – get 20 per cent tax relief on their pension contributions.
But earlier this week (February 18 2020), the Express reported that ministers are considering scrapping the relief for higher rate taxpayers and putting everyone on 20 per cent.
And according to The Telegraph, Steve said the changes could see those affected “lose £2,500 each a year”.
He explained, according to the newspaper: “Those gaining from the changes won’t thank the government, because nobody understands pension tax relief. The losers will know exactly what’s just happened.
“There is a reason this hasn’t been done. Successive governments have looked at it and backed away.”
There is a reason this hasn’t been done.
Speaking further, the former pensions minister, who is now a partner at pensions consultancy firm LCP, warned that the changes would affect younger people, adding: “People retiring today have had the benefit of higher rate relief. The next generation won’t.”
It is believed that slashing the relief rate for higher earners would generate an estimated £10bn-per-year boost for the Treasury.
Chancellor Rishi Sunak is reportedly meeting Prime Minister Boris Johnson at Downing Street today (February 19 2020) to talk through his plans for this year’s Budget, due on March 11.
He was appointed to the Chancellor role only last week, following a brutal cabinet reshuffle that saw a number of ministers axed or forced to hand in their resignations.
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Among those to go were former Chancellor Sajid Javid, who stepped down, while Business Secretary Andrea Leadsom and Northern Ireland Secretary Julian Smith were both sacked, as was Housing Minister Esther McVey, Environment Secretary Theresa Villiers and Attorney General Geoffrey Cox.
Amid the changes, Labour’s John McDonnell was reported to have claimed the government is “in crisis”, saying according to the BBC’s Chris Mason: “This must be a historical record with the government in crisis after just over two months in power.”
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