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Exclusive: Fabian Society says tax breaks cost £66bn and are skewed towards better-offRachel Reeves could raise at least £10bn a year through a radical shake-up of pensions that would make tax relief less generous to better-off earners, a leading left-of-centre thinktank has said.The report by the Fabian Society says tax breaks for pensions have become markedly more expensive for the government and that its proposed changes would fill half the £22bn shortfall the chancellor has identified in the public finances.Creating a single flat rate of tax relief for individual and employer pension contributions for all tax bands (eg 25p or 30p for each pound of gross income). At the moment, pension tax relief depends on an individual’s marginal tax band.Levy employee national insurance on employer pension contributions in exchange for a higher government top-up on the first £7,500 of annual pension saving.Reduce the maximum tax-free lump sum to the lower of £100,000 or 25% of pension wealth. At present, the tax-free lump sum can be in excess of £250,000.Fairly tax the inheritance of pensions by subjecting pensions to inheritance tax and levying income tax on all inherited pensions.Charge employee national insurance on private pension incomes (with an allowance to exclude small pensions) in exchange for cancelling the forthcoming cut to winter fuel payment. Continue reading…
Exclusive: Fabian Society says tax breaks cost £66bn and are skewed towards better-off
Rachel Reeves could raise at least £10bn a year through a radical shake-up of pensions that would make tax relief less generous to better-off earners, a leading left-of-centre thinktank has said.
The report by the Fabian Society says tax breaks for pensions have become markedly more expensive for the government and that its proposed changes would fill half the £22bn shortfall the chancellor has identified in the public finances.
Creating a single flat rate of tax relief for individual and employer pension contributions for all tax bands (eg 25p or 30p for each pound of gross income). At the moment, pension tax relief depends on an individual’s marginal tax band.
Levy employee national insurance on employer pension contributions in exchange for a higher government top-up on the first £7,500 of annual pension saving.
Reduce the maximum tax-free lump sum to the lower of £100,000 or 25% of pension wealth. At present, the tax-free lump sum can be in excess of £250,000.
Fairly tax the inheritance of pensions by subjecting pensions to inheritance tax and levying income tax on all inherited pensions.
Charge employee national insurance on private pension incomes (with an allowance to exclude small pensions) in exchange for cancelling the forthcoming cut to winter fuel payment.
