The Autumn Budget 2018 could mark the beginning of considerable tax relief changes. The current rules which have been described as generous, are coming under pressure to be reformed from both government organisations and industry experts.
If you are a high earner, this post spells out the likely changes that will affect your pension tax relief.
In June 2018, British Prime Minister Theresa May announced £20 billion for the NHS with Chancellor Philip Hammond announcing that this money would come from the UK taxpayer. It is believed that a considerable chunk of this money will come from the tightening of tax relief for high earners.
Tax relief has come under further pressure as the cost of it is rising. A decade ago £30 billion was spent on it, and estimates put the current figure at closer to 41 billion. This is mostly due to auto-enrolment pension laws.
With costs rising and the pressure mounting a cross-party group of MPs and a Treasury report highlighted that “pension tax relief is not an effective or well-targeted way of incentivising saving into pensions.”
The cross-party group concluded that the way forward was to introduce a flat rate of tax relief or reducing the current £40,000 annual allowance threshold.
Should the Chancellor opt for a new flat rate of tax relief, the smart money is a figure of around 30%. Currently, tax relief benefits 50% of high earners and only 10% are paid to lower rate taxpayers. A 30% figure would address the imbalance and fits in with his ‘fair and balanced’ mantra.
Are you Concerned about Tax Relief Changes?
If you are concerned about possible changes to tax relief come the end of October act now. Speak to a good independent financial planner in the first instance and arm yourself with all the facts. You may be able to use carry forward if you have a sizeable pot and have been contributing for over 3 years. This will help you offset a tax relief based pension change.
Together, as well as looking at carry forward, we will determine and explore:
- The size of your fund should tax relief change significantly
- Your current earnings to see if the pot can be shored up using increased pension contributions
- How much money you will have to spend in retirement
- Checking your pension against lifetime allowance
- Utilising your pension to pass on to funds other accounts and inheritance
Complete the CALL BACK SERVICE form and let’s discuss your options.