Relief for middle-class savers as it appears tax raid on pensions WILL NOT go ahead
Pension tax relief is expected to have cost the Government £38.2billion last year
A TAX raid on pension relief has been ruled out following speculation that the government would make changes to fill a black hole in the budget.
After the Chancellor Philip Hammond made a U-turn on National Insurance contributions for the self-employed, the Treasury is now under pressure to fill a £2billion funding hole.
But, according to private papers seen by , the Treasury has admitted that "now is not the right time" for a pension tax raid.
In a letter between Jane Ellison MP and the chief executive of AJ Bell, one of Britain's biggest pension firms, Ellison said that a proposed raid on middle-class pension savers will not take place in the foreseeable future.
The letter said: "As you are aware, an extensive consultation was conducted last year which considered changes to the pensions tax framework.
"This concluded that now was not the right time to undertake significant reform.
"Given this the Government does not think that it is necessary to convene an independent pensions commission at this time."
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Pension tax relief is expected to have cost the Government £38.2billion last year, according to the latest HMRC data.
Former Chancellor George Osborne initially proposed a shake-up of pension tax relief last year, suggesting that the generous tax perks for higher-rate and additional-rate (40 per cent and 45 per cent) taxpayers be taken away.
Instead, a "flat rate" of tax relief for all taxpayers was proposed, as was scrapping pension tax relief altogether.
But Osborne backed out of making any radical changes in an attempt to avoid a major backlash from wealthy savers ahead of the Brexit referendum last June.
The Sun Online has contacted the Treasury for comment.
What is pension tax relief?
WHEN paying into your pension, you receive tax relief on any contributions that you make.
If you are a basic-rate taxpayer, you will receive 20 per cent tax relief, so to put £100 into your pension, you'll only need to make an £80 contribution.
A higher-rate taxpayer (paying 40 per cent tax) will only need to pay £60 to achieve £100 of pension savings.
People who don't earn enough to pay any income tax can still receive tax relief at the basic rate. These people are called nil-rate payers and can make up to £3,600 of pension contributions a year.
You get the tax relief automatically if your employer takes workplace pension contributions out of your pay before deducting income tax, or if your pension provider claims tax relief for you at a rate of 20 per cent and adds it to your pension pot.
Some people will have to claim tax relief themselves - if their pension scheme isn't set up for automatic tax relief. This is done by claiming it on your self-assessment tax return.
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