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Pension tax rethink worth ‘hundreds of millions’

17-01-2020

With the Treasury reportedly considering plans to raise the point at which restrictions to the pensions annual allowance kick in by £40,000 to £150,000, former pensions minister Sir Steve Webb has said such a move would hand “hundreds of millions in tax relief to tens of thousands of people”. Sir Steve says the tapered annual allowance is a “bad tax and bad law”, which “you just have to get rid of”. He added that the UK has a “really complicated” tax system and that the tapered annual allowance is “unpredictable, capricious and has cliff edges.” Analysts say the mooted change would mostly affect those paying the 45% top rate of income tax. HMRC figures show that the number of pension savers paying tax after breaching the annual allowance limit reached a record high in the 2017/18 tax year, with £812m of pension contributions made in excess of the a llowance. Commenting on the proposed rethink, former shadow pensions minister Gregg McClymont, of The People’s Pension, urged ministers to hold a “long awaited and much needed” comprehensive review of the way pensions tax operates. If the Treasury agrees the overhaul, an announcement is expected by Chancellor Sajid Javid in the Budget in March.

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