British Finance Minister Rishi Sunak has continued to spend big when it comes to helping the economy through the pandemic. However, this means raising the U.K. taxation rate to its most elevated level for over 50 years in order to start covering the bill.
According to recent reports,
“Government proposals to tax pensions as a means of paying the U.K.’s way out of the Covid-19 economic hole would be a ‘double whammy’ on future generations. ”
“Once again, the prospect of reforming pension tax relief for higher earners is being floated as a means to restore holes in the government’s finances.”
Downing Street has repeatedly fought to keep the “triple lock” framework, which currently would see pensions rise by up to 6% one year from now. In their 2019 declaration, the Conservatives vowed not to raise the rates of income tax, national insurance, or VAT and vowed to hold the triple lock on pensions. Due to this, the Treasury is looking at options to raise money from pension contributors without affecting the triple lock. As per the Independent, the plans being considered are as follows:
- Reducing the pensions lifetime allowance from £1,073,100 to around £800,000. Pension savings over the allowance are charged at 55% whenever taken out as a lump sum, or 25% whenever paid in any other way.
- Reducing the level of pension tax relief available to higher-rate taxpayers from 40% to 20%.
- Introducing new taxes on employer pension contributions.
“Any change to tax relief that results in reduced take-home pay would risk increased ‘opt-outs.’ ”
Business advisor. (n.d.). Retrieved from https://www.business-standard.com/article/international/rishi-sunak-plots-tax-raid-to-plug-uk-deficit-risking-tory-rage-121030100034_1.html
FT Advisors. (n.d.). Retrieved from https://www.ftadviser.com/pensions/2021/06/21/future-generations-hit-by-govt-s-pension-tax-plans/
Independent. (n.d.). Retrieved from https://www.independent.co.uk/news/uk/politics/pension-tax-raid-sunak-johnson-b1869494.html