Middle-class workers face paying up to £10 billion more in income tax as Jeremy Hunt considers drastically reducing the relief they currently enjoy on their pension contributions.
The Chancellor is in discussions over changing tax rules designed to encourage employees to save into their pensions pots – resurrecting a George Osborne-era plan that was ultimately abandoned after objections from Conservative MPs.
Ministers have discussed reducing the rate at which income tax relief is applied to Britain’s 5.5 million higher-rate taxpayers from 40p to a flat rate as low as 20p. Another option being considered is to increase the number of very high earners whose income tax relief is cut even further.
The total cost of pension tax relief to the Exchequer is £42.7 billion, of which £22.9 billion is relief on income tax and £19.8 billion is on National Insurance contributions.
A flat rate of 20 per cent would raise between £8 billion and £10 billion a year, according to a report by the Pensions and Lifetime Savings Association.
On Saturday night, Mr Hunt, Rishi Sunak, the Prime Minister, and their officials were assembled in Downing Street to discuss the headline policies of the Autumn Statement, which will be delivered to Parliament in a fortnight.
A Treasury source said income tax relief on pensions “has been discussed” in ongoing talks, and was still on the table. However, by Saturday night, no “white smoke” had yet emerged.
The Telegraph understands the Government’s commitment to the triple lock on pensions is another of the major policies still under discussion, after days of Downing Street refusing to rule out it being scrapped.
Ministers must submit their plans to the Office for Budget Responsibility by Monday morning.
The plan to increase tax on pension contributions would amount to an income raid on any workers earning more than £50,270, who receive a tax break on the money they pay into their pensions at a rate of 40 per cent under the current system.
Instead, under one version of this plan all contributions would be taxed at a “flat rate” of 20 per cent, regardless of the income tax bracket the worker falls in. A second version would have the flat rate higher, such as 25 per cent, giving a boost to those who pay the 20p tax rate. Another would see tax relief on higher earners fall, but not as far as 20p.
Under current rules, a person who pays a higher rate of income tax for the whole of their career, contributes 12 per cent to a private pension and retires after reaching a salary of £64,000, would get £20,900 a year in retirement.
Under the planned rules, with a flat rate of 20p, the same person would earn £18,800 a year if they did not increase their pension contributions, reducing their take-home pay in the process.
The policy will be controversial among economists and Conservative MPs, who have previously warned it could result in workers saving less of their income for retirement.
Higher income PAYE already pay a ridiculous amount of tax in this country.
[deleted]
Won’t this just make people use their employers pension with salary sacrifice instead of sipps, like would this actually raise much revenue considering NI receipts would drop ?
If they did this why would anyone pay into a pension?
A pension basically allows you to delay paying tax. Instead of paying 40% tax I can put money in my pension, which will then be taxed as income when I’m retired.
If they remove the tax relief then I’m paying income tax twice on my pension contributions, when I put them in and when I take them out.
It would be more tax efficient to stop paying into your pension. Higher revenues for the government in the short term, but will destroy private pension provision and leave far more people dependent on state aid in 30 years time.
Half of that will cover the money which went missing to Covid relief fraud
We do not need to tax pensioners. We do not need to means test pensioners income. We need to tax non-doms, financiers, landlords, corporations and billionaires. We need to tax people who do nothing to make money but fiddle numbers and own property and contribute nothing to the economy or society. This is a political choice and once again it is the wrong one.
This tory government will do anything but tax the people who actually need to be taxed, they are not on your side and never have been.
They don’t care about your pension, they don’t care about your mortgage, they don’t care about your mum and dad’s social care, they don’t care about the NHS. They care about one thing and one thing only:
enriching themselves and their mates at your expense.
If you vote tory and you’re not a billionaire you are a useful idiot. End of.
Ok, but after that’s paid off not quite all of what your party blew on PPE scams what next?
This headline reads like we’re supposed to be surprised
How about we actually investigate the dodgy contracts during the COVID lockdown that were just handed out to anyone that had the phone number of Hancock and Rishi and recoup the $B lost like that?
Whilst this headline sounds like they are “sticking it to the rich”, unfortunately Tory PR terms like “the better off” and “those with the broadest shoulders” are still referring to ordinary working people and not the super rich for whom the effort made to avoid paying a fair share of tax is simply the cost of doing business.
All of these rumored policies feel like they are setting a fiscal bear trap for the upcoming Labour government as its unlikely they will be able to roll them back easily by the time they get in. The current government feels like a business that has gone into bankruptcy with nothing left to be done but liquidate any remaining assets before the inevitable winding up.
Finally going after the non-doms with big property portfolios..Oh, he means my piss-poor pension pot doesn’t he?
This is ridiculous. They should be going after the big fish.
Corporations
Billionaires
Taxing landlords to the back teeth.
Not going after working people who are trying to save for their future.
Yea this country is at an extremely bad point. 50k is not “well off” and won’t even qualify you for a mortage in most places now due to insane housing. But we can’t just raise 50k tax band without funding it somewhere else or have a huge economic boom where everyones salaries go up.
Taxing people’s pension contributions based on how much they earn is ridiculous – the more people save now, the less likely they will need support when they get old. This is explicitly avoiding all of the boomers who already have nice pension pots, often DB schemes that don’t exist anymore, and house equity. Let’s just have a wealth tax and move on.
Most young people I know have cancelled their pension at work just to stay above water so GL with that Jeremy
Why not tax the rich instead
“Plots” and “better off” are interesting language.
A plot: plan made in secret by a group of people to do something illegal or harmful.
And “better off”? Where on the scale? I’m “better off” than most as I earn more than the average, but I don’t consider myself to be targeted by “tax grabs”!
Or how about Tory governments stop spaffing billions up the wall by giving functionally useless contracts to their mates companies? That too would save the nation billions!
Most of the £600 billion COVID relief worked it’s way to the top of the ladder. Straight to landlords, mortgage providers and energy profiteers.
Let’s get that back. First things first, tax landlords endlessly.
Make it non profitable to hoard housing that others could benefit from.
Trickle down, flat tax, low regulations. All proven not to work, so only here to just fuck over people.
Fuck sake Tory cunts. I claim
My tax relief on my pension contributions every year as I have a relief at source pension rather than salary sacrifice this is first year my tax code has been adjusted to accommodate my contributions to save claiming at end of tax year so I better not owe the bastards anything
Gulp.
My household income is £110k before tax.
After childcare for 2 and a mortgage in the south it really isn’t as much as it looks.
This is gonna hit me isn’t it?
Fucking idiotic to discourage pensions savings considering we all know the state pension will be fucked by the time we get to needing it. Hike income tax instead.
[deleted]
After i read a headline I look to see which newspaper it’s from. Telegraph. Pandering to the readership.
Better off. Not wealthy Tory donors. Just middle class schmucks who cannot fight back.
Some big numbers being hurled around here, incomes of several £1000 a month, yet the government believe an adult only needs £334 a month for light, heat and food.
They’re so woefully out of touch, is any real surprise they dont realise that even £3k a month is tough in a lot of places?
The UK should cut taxes and cut spending. Oh wait, they tried that.
O you wait till they play this vs nurses asking for 16 percent rises.
You can see it now
Tax the middle class workers while the wealthy pensioners get a minimum wage salary a month on top of their defined benefits just for being alive. What a system.
I dont see how its reasonably fair to tax pension payments on the way in and then levy income tax on the way out when drawing down.. calling it a “reduction to flat rate” is irrelevant. A persons pension contributions are supposed to be zero rated, if they are a base rate or other tax rates payer.
Target getting money from the billions in tax evasion. The mega yachts people who seem to be able to take pension funds, spend with impunity, ruin thousands of peoples retirement and swan off round the world on a yacht with hookers blowing coke up their arseholes – because “well, it was all in my wife name, guv – im innocent”
stop creaming a bit more off the top of the few and going “well they earn 100k in that house! they can afford it” … target the people who earn millions and pay nothing. Target the companies who profit billions off our economy and have a postbox in some other country so pay fuck all in corporation tax.
fucksake people.
Aah yes, the workers. It was the worker’s fault all along.
Everyone needs to contribute more, from the tax dodging rich, tax paying wealthy, the already struggling and the jobless bums. The reality of the situation is that our country is broke from a financial recession, it never properly recovered from and several unnecessary lockdowns that will kill more than they saved.
……and £50 billion tax grab from the poor.
Then Truss’s and Kwarzi’s little economic experiment will be covered…👍
Pension contributions should be tax free (hence the rebate in the first place), as they’re taxed on the way out. Surely we should be encouraging people to save for retirement?
35 comments
From the telegraph:
Middle-class workers face paying up to £10 billion more in income tax as Jeremy Hunt considers drastically reducing the relief they currently enjoy on their pension contributions.
The Chancellor is in discussions over changing tax rules designed to encourage employees to save into their pensions pots – resurrecting a George Osborne-era plan that was ultimately abandoned after objections from Conservative MPs.
Ministers have discussed reducing the rate at which income tax relief is applied to Britain’s 5.5 million higher-rate taxpayers from 40p to a flat rate as low as 20p. Another option being considered is to increase the number of very high earners whose income tax relief is cut even further.
The total cost of pension tax relief to the Exchequer is £42.7 billion, of which £22.9 billion is relief on income tax and £19.8 billion is on National Insurance contributions.
A flat rate of 20 per cent would raise between £8 billion and £10 billion a year, according to a report by the Pensions and Lifetime Savings Association.
On Saturday night, Mr Hunt, Rishi Sunak, the Prime Minister, and their officials were assembled in Downing Street to discuss the headline policies of the Autumn Statement, which will be delivered to Parliament in a fortnight.
A Treasury source said income tax relief on pensions “has been discussed” in ongoing talks, and was still on the table. However, by Saturday night, no “white smoke” had yet emerged.
The Telegraph understands the Government’s commitment to the triple lock on pensions is another of the major policies still under discussion, after days of Downing Street refusing to rule out it being scrapped.
Ministers must submit their plans to the Office for Budget Responsibility by Monday morning.
The plan to increase tax on pension contributions would amount to an income raid on any workers earning more than £50,270, who receive a tax break on the money they pay into their pensions at a rate of 40 per cent under the current system.
Instead, under one version of this plan all contributions would be taxed at a “flat rate” of 20 per cent, regardless of the income tax bracket the worker falls in. A second version would have the flat rate higher, such as 25 per cent, giving a boost to those who pay the 20p tax rate. Another would see tax relief on higher earners fall, but not as far as 20p.
Under current rules, a person who pays a higher rate of income tax for the whole of their career, contributes 12 per cent to a private pension and retires after reaching a salary of £64,000, would get £20,900 a year in retirement.
Under the planned rules, with a flat rate of 20p, the same person would earn £18,800 a year if they did not increase their pension contributions, reducing their take-home pay in the process.
The policy will be controversial among economists and Conservative MPs, who have previously warned it could result in workers saving less of their income for retirement.
Higher income PAYE already pay a ridiculous amount of tax in this country.
[deleted]
Won’t this just make people use their employers pension with salary sacrifice instead of sipps, like would this actually raise much revenue considering NI receipts would drop ?
If they did this why would anyone pay into a pension?
A pension basically allows you to delay paying tax. Instead of paying 40% tax I can put money in my pension, which will then be taxed as income when I’m retired.
If they remove the tax relief then I’m paying income tax twice on my pension contributions, when I put them in and when I take them out.
It would be more tax efficient to stop paying into your pension. Higher revenues for the government in the short term, but will destroy private pension provision and leave far more people dependent on state aid in 30 years time.
Half of that will cover the money which went missing to Covid relief fraud
We do not need to tax pensioners. We do not need to means test pensioners income. We need to tax non-doms, financiers, landlords, corporations and billionaires. We need to tax people who do nothing to make money but fiddle numbers and own property and contribute nothing to the economy or society. This is a political choice and once again it is the wrong one.
This tory government will do anything but tax the people who actually need to be taxed, they are not on your side and never have been.
They don’t care about your pension, they don’t care about your mortgage, they don’t care about your mum and dad’s social care, they don’t care about the NHS. They care about one thing and one thing only:
enriching themselves and their mates at your expense.
If you vote tory and you’re not a billionaire you are a useful idiot. End of.
Ok, but after that’s paid off not quite all of what your party blew on PPE scams what next?
This headline reads like we’re supposed to be surprised
How about we actually investigate the dodgy contracts during the COVID lockdown that were just handed out to anyone that had the phone number of Hancock and Rishi and recoup the $B lost like that?
Whilst this headline sounds like they are “sticking it to the rich”, unfortunately Tory PR terms like “the better off” and “those with the broadest shoulders” are still referring to ordinary working people and not the super rich for whom the effort made to avoid paying a fair share of tax is simply the cost of doing business.
All of these rumored policies feel like they are setting a fiscal bear trap for the upcoming Labour government as its unlikely they will be able to roll them back easily by the time they get in. The current government feels like a business that has gone into bankruptcy with nothing left to be done but liquidate any remaining assets before the inevitable winding up.
Finally going after the non-doms with big property portfolios..Oh, he means my piss-poor pension pot doesn’t he?
This is ridiculous. They should be going after the big fish.
Corporations
Billionaires
Taxing landlords to the back teeth.
Not going after working people who are trying to save for their future.
Yea this country is at an extremely bad point. 50k is not “well off” and won’t even qualify you for a mortage in most places now due to insane housing. But we can’t just raise 50k tax band without funding it somewhere else or have a huge economic boom where everyones salaries go up.
Taxing people’s pension contributions based on how much they earn is ridiculous – the more people save now, the less likely they will need support when they get old. This is explicitly avoiding all of the boomers who already have nice pension pots, often DB schemes that don’t exist anymore, and house equity. Let’s just have a wealth tax and move on.
Most young people I know have cancelled their pension at work just to stay above water so GL with that Jeremy
Why not tax the rich instead
“Plots” and “better off” are interesting language.
A plot: plan made in secret by a group of people to do something illegal or harmful.
And “better off”? Where on the scale? I’m “better off” than most as I earn more than the average, but I don’t consider myself to be targeted by “tax grabs”!
Or how about Tory governments stop spaffing billions up the wall by giving functionally useless contracts to their mates companies? That too would save the nation billions!
Most of the £600 billion COVID relief worked it’s way to the top of the ladder. Straight to landlords, mortgage providers and energy profiteers.
Let’s get that back. First things first, tax landlords endlessly.
Make it non profitable to hoard housing that others could benefit from.
Trickle down, flat tax, low regulations. All proven not to work, so only here to just fuck over people.
Fuck sake Tory cunts. I claim
My tax relief on my pension contributions every year as I have a relief at source pension rather than salary sacrifice this is first year my tax code has been adjusted to accommodate my contributions to save claiming at end of tax year so I better not owe the bastards anything
Gulp.
My household income is £110k before tax.
After childcare for 2 and a mortgage in the south it really isn’t as much as it looks.
This is gonna hit me isn’t it?
Fucking idiotic to discourage pensions savings considering we all know the state pension will be fucked by the time we get to needing it. Hike income tax instead.
[deleted]
After i read a headline I look to see which newspaper it’s from. Telegraph. Pandering to the readership.
Better off. Not wealthy Tory donors. Just middle class schmucks who cannot fight back.
Some big numbers being hurled around here, incomes of several £1000 a month, yet the government believe an adult only needs £334 a month for light, heat and food.
They’re so woefully out of touch, is any real surprise they dont realise that even £3k a month is tough in a lot of places?
The UK should cut taxes and cut spending. Oh wait, they tried that.
O you wait till they play this vs nurses asking for 16 percent rises.
You can see it now
Tax the middle class workers while the wealthy pensioners get a minimum wage salary a month on top of their defined benefits just for being alive. What a system.
I dont see how its reasonably fair to tax pension payments on the way in and then levy income tax on the way out when drawing down.. calling it a “reduction to flat rate” is irrelevant. A persons pension contributions are supposed to be zero rated, if they are a base rate or other tax rates payer.
Target getting money from the billions in tax evasion. The mega yachts people who seem to be able to take pension funds, spend with impunity, ruin thousands of peoples retirement and swan off round the world on a yacht with hookers blowing coke up their arseholes – because “well, it was all in my wife name, guv – im innocent”
stop creaming a bit more off the top of the few and going “well they earn 100k in that house! they can afford it” … target the people who earn millions and pay nothing. Target the companies who profit billions off our economy and have a postbox in some other country so pay fuck all in corporation tax.
fucksake people.
Aah yes, the workers. It was the worker’s fault all along.
Everyone needs to contribute more, from the tax dodging rich, tax paying wealthy, the already struggling and the jobless bums. The reality of the situation is that our country is broke from a financial recession, it never properly recovered from and several unnecessary lockdowns that will kill more than they saved.
……and £50 billion tax grab from the poor.
Then Truss’s and Kwarzi’s little economic experiment will be covered…👍
Pension contributions should be tax free (hence the rebate in the first place), as they’re taxed on the way out. Surely we should be encouraging people to save for retirement?