{"id":27196,"date":"2024-09-12T10:19:05","date_gmt":"2024-09-12T09:19:05","guid":{"rendered":"https:\/\/smh.group\/?p=27196"},"modified":"2024-09-25T12:54:03","modified_gmt":"2024-09-25T11:54:03","slug":"will-pension-tax-relief-be-cut-in-the-next-budget","status":"publish","type":"post","link":"https:\/\/devstagesite.co.uk\/smhgroup\/will-pension-tax-relief-be-cut-in-the-next-budget\/","title":{"rendered":"Will Pension Tax Relief Be Cut in the Next Budget?"},"content":{"rendered":"

HMRC<\/a> has released updated estimates for the cost of pension tax relief, a figure Rachel Reeves is likely keeping an eye on as she prepares for her first Budget on 30 October.<\/strong><\/p>\n

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Source: HMRC<\/em><\/p>\n

It was pure coincidence, but two days after the Chancellor had revealed a \u00a322 billion black hole in government finances for the current financial year, HMRC released its annual update of the cost of pension tax reliefs. The headline figure (for 2022\/23) was \u00a348.7bn, more than twice the size of that black hole.<\/p>\n

That huge multi-billion figure of pension relief is not as straightforward as it seems, a point often missed in media coverage. It is the sum of seven separate components:<\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n
Source in 2022\/23<\/strong><\/td>\n\u00a3 billion<\/strong><\/td>\n<\/tr>\n
Personal income tax relief on contributions made by employers, employees and the self-employed.<\/td>\n42.5<\/td>\n<\/tr>\n
National insurance contribution (NIC) relief on employer contributions.<\/td>\n15.4<\/td>\n<\/tr>\n
NIC relief on employee contributions.<\/td>\n\u00a0 8.5<\/td>\n<\/tr>\n
Personal income tax relief on pension fund investment income.<\/td>\n\u00a0 4.3<\/td>\n<\/tr>\n
less<\/em><\/td>\n<\/td>\n<\/tr>\n
Personal income tax on payments from<\/em> pension schemes.<\/td>\n(21.1)<\/td>\n<\/tr>\n
Annual allowance charges<\/td>\n\u00a0 (0.3)<\/td>\n<\/tr>\n
Lifetime allowances charges<\/td>\n\u00a0 (0.5)<\/td>\n<\/tr>\n
TOTAL*<\/strong><\/td>\n48.7<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

*Figures do not total due to rounding <\/em><\/p>\n

The standout element is the \u00a342.5 billion of income tax relief on pension contributions, nearly two-thirds of which is claimed by higher and additional rate taxpayers (as shown in the \u2018Pensions Contributions: Income Tax Relief\u2019 pie chart above). The current freeze on personal allowance and higher rate thresholds, along with the near \u00a325,000 reduction in the additional rate threshold in 2023\/24, has likely exacerbated the skew.<\/p>\n

In the words of many pre-Budget commentaries, pension contribution tax relief is a \u2018low-hanging fruit\u2019 for any chancellor looking for extra revenue. However, to date, the pickings have been limited to reducing the maximum tax-relievable contribution via the annual allowance rather than the rate of relief. This salami-slicing approach has created its own problems, notably among NHS consultants and senior doctors who were encouraged to choose early retirement or reduced hours rather than paying pension tax charges.<\/p>\n

The possibility of cutting the rate of income tax relief is now being reconsidered by the Treasury, according to several media reports. For example, replacing the current system with a single 30% flat rate of relief would benefit most taxpayers (who currently receive 20% basic rate relief), but save the Exchequer about \u00a33 billion a year. If you are not a basic rate taxpayer, you may want to bring forward any planned pension contributions before 30 October, when Rachel Reeves presents her first Budget.<\/p>\n

To discuss your financial planning,\u00a0contact<\/a>\u00a0our\u00a0Sheffield based Financial Advisers<\/strong><\/a> on 0114 266 4432<\/strong>\u00a0or\u00a0info@smh.group<\/strong><\/a><\/p>\n

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.<\/em><\/h6>\n
Tax treatment varies according to individual circumstances and is subject to change.<\/em><\/h6>\n
The Financial Conduct Authority does not regulate tax advice. <\/em><\/h6>\n","protected":false},"excerpt":{"rendered":"

HMRC has released updated estimates for the cost of pension tax relief, a figure Rachel Reeves is likely keeping an eye on as she prepares for her first Budget on 30 October.<\/p>\n","protected":false},"author":4,"featured_media":27198,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[16],"tags":[83,98,77,11,79,24,247],"class_list":["post-27196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-financial-services","tag-chartered-accountants","tag-financial-advice","tag-financial-planning","tag-hmrc","tag-pension","tag-pensions","tag-retirement-planning"],"acf":[],"yoast_head":"\nWill Pension Tax Relief Be Cut in the Next Budget? - SMH Group<\/title>\n<meta name=\"description\" content=\"HMRC has released updated estimates for the cost of pension tax relief, a figure Rachel Reeves is likely keeping an eye on.\" \/>\n<meta name=\"robots\" content=\"noindex, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Will Pension Tax Relief Be Cut in the Next Budget? 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