HMRC review signals potential pension tax changes in Autumn
Rachel Reeves could target pension savers in fresh tax grab as the Chancellor looks for additional ways to fund the government’s ballooning spending.
His Majesty’s Revenue and Customs (HMRC) has published research as part of an official review of workplace retirement schemes, exploring cuts to the tax benefits of salary sacrifice pension schemes.
The schemes, which reduce the amount of tax and national insurance paid by both employees and employers, could be scrapped altogether if the Chancellor follows through on the recommendations in the report.
This opens up a new avenue for Reeves to raise capital in her second Autumn Budget as the Chancellor desperately tries to follow her fiscal rules.
The changes would slap an extra £500 a year on the average earner’s tax bill and shrink the size of their pension pot.
Pension tax raid expected to be on the agenda
Former pensions minister Sir Steve Webb said: “It is very revealing that HMRC has paid for research into the likely response from employers”.
Whilst the research was commissioned under the previous government, Webb said the desire to raise additional revenue was “even more acute today”.
Government borrowing spiked in April to £20.2bn, racing ahead of economists’ projection of £18bn.
Labour has also begun to backtrack on winter-fuel cuts and the two-child benefit cap, which could leave Reeves with a £30bn blackhole according to the National Institute of Economic and Social Research.
Webb said the HMRC’s review put a pension tax raid “firmly on the agenda”.
The fresh warning follows a leaked memo obtained by The Telegraph, where Deputy Prime Minister Angela Rayner lobbied the Chancellor to up taxes on savers.
The suggested measures included an end to inheritance tax relief for AIM investors, increasing the surcharge on banks and reinstatement of the pensions lifetime allowance. Rayner said the proposals could help prevent £5bn of welfare cuts.
A government spokesperson said: “These claims are totally speculative. HMRC regularly commissions independent research on all aspects of the tax system.
”We are committed to keeping taxes for working people as low as possible which is why, at last Autumn’s Budget, we protected working people’s payslips and kept our promise to not raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT.”