Savers get tax relief when they pay into a pension. There is tax relief of 20 per cent for basic rate-payers – those earning under £50,270 – with higher and additional rate taxpayers able to get more back.
square PENSIONS AND RETIREMENT MappedThe areas where life expectancy is just a few years above state pension age of 66
Read More
There are fears that the Chancellor may target pensions as a way to raise revenue without breaking Labour’s pledge not to increase income tax, national insurance, or VAT.
Rowan Morrow-McDade, tax director at Alexander & Co Chartered Accountants, said: “We’ve seen a surge of client making pension contributions now, ahead of any potential pension changes.
Contributors to pensions currently benefit from tax relief at a “marginal rate”, meaning basic rate taxpayers get 20 per cent, higher-rate taxpayers 40 per cent and additional-rate taxpayers 45 per cent.
Greg Moss, director of Eleven 2 financial planning, said: “We have a lot of higher earners who are using pension contributions to get their income under £100,000 to avoid marginal income tax cliff edges.
Independent financial adviser David Stirling, said one of his clients was advised this week by their accountant to make a lump sum contribution to their self-invested personal pension (SIPP).
Although Reeves did not touch pension tax relief in last year’s Budget despite speculation she would do so, some believe her options are now more limited.
Others are less sure. Jason Hollands of Evelyn Partners pointed out that while scrapping higher-rate relief might raise money, it would be politically difficult, particularly given the generous pension schemes enjoyed by many public sector workers.
“A more straightforward option for a Government wanting to reduce the cost to the Treasury of pension tax reliefs would be cut the annual allowance [the £60,000 limit you can save into your pension each tax year without incurring a tax charge] rather than reduce reliefs to basic rate tax or some other flat rate.”
Should you put more in your pension in case of tax changes
“Rushed decisions can backfire and it’s important to look at long-term planning and annual allowance limits, not just the short-term headlines,” explained Mr Stirling.
“I believe any change would be forward looking and not retrospective on benefits already accrued. Additionally, I do not see any change being applied immediately,” said Alex Pugh, a financial planner at Saltus.
“If you’re a higher rate tax payer, you’re planning on making pension contributions anyway, and you can afford it, there’s no major downside to going early in the tax year if you’re worried about the Budget,” added Mr Moss.
Setting a flat rate above the current 20 per cent basic rate would benefit lower earners who are increasing the amounts they receive into their pensions at the expense of higher earners who would have higher tax bills to pay.
What other moves are pension savers making?
Beyond contributions, some retirees are also choosing to take their 25 per cent tax-free pension lump sums now, despite no official announcement suggesting these are under threat.
Mr Morrow-McDade said: “We’ve had a couple of clients cash in their 25 per cent tax free lump sum, again on the basis that Reeves might cut this.”
She said: “I have certainly been speaking to clients who are considering the, possibly diminishing, future of their tax-free retirement cash.”
The UK Government has been contacted for comment.
Hence then, the article about more people piling money into pensions fearing tax relief raid should you do it was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( More people piling money into pensions fearing tax-relief raid – should you do it? )
Also on site :