Despite many rumours, there were no changes to pensions tax relief in the Autumn Budget. Chancellor Hammond’s remarks that tax relief on pensions was “eye-wateringly expensive” led many to believe that the annual amount most of us can save in our pensions would be cut or the rate of tax relief on pension savings would be reduced for higher rate taxpayers.
Neither of these measures were included, as extra NHS funding was found from better than forecast tax receipts and lower borrowing costs.
Good news for the majority of those saving for retirement who will still be able to claim tax relief at their highest tax rate on up to £40,000 per year.
There was however a warning that an emergency Budget could be held in the spring, if Brexit negotiations resulted in no deal, leaving Treasury forecasts in tatters. In these circumstances, all the proposed measures announced in the autumn could be overridden.
This could mean pensions tax relief reform could be back on the agenda, as a means of raising tax, via a cut in the amount of tax relief added to our own pension savings or on those investments made by employers on behalf of their staff.
For those who did not get round to making pension savings before the Budget, it is worth noting that Brexit is now less than 150 days away, and the tax year end a mere week after that.
Making use of the generous allowances and up to three years of tax relief carried forward from earlier years before the next Budget could prove to be a good decision.
Top rate taxpayers have a lower annual allowance of between £10,000 and £39,999. For every £2 of taxable income over £150,000 they lose £1 of allowance up to £210,000 of income when the allowance is a flat £10,000 per year.
This tax year will be the last chance for many top rate taxpayers to carry forward up to £40,000 from three years ago.
Predicting what may be in Budgets is difficult and while we were pleased that our earlier warning of changes came to nothing, complacency about the Treasury’s future intentions could be misplaced. If you want to save for retirement and have the funds to do so, acting sooner rather than later could be the best policy.
Director of Public Policy, LEBC
Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment or product for your circumstances please contact an adviser. A pension is a long term investment the fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. The Financial Conduct Authority does not regulate estate planning, tax advice, wills or trusts. Tax rates and allowances may change in future.Back to News & Views