Rishi Sunak is set to deliver his Spending Review on Wednesday, with his Autumn Budget having been cancelled last month. As Britons await the Chancellor’s plans to cover the costs that have come with the coronavirus pandemic, many have been wondering whether tax changes could be ahead.
However, Treasury sources have reportedly suggested decisions on tax rises could be put off until later in the year, if the economy went back in to recession.
Higher earners currently get 40 percent tax relief on pension contributions.
However, chances could mean they face a significant reduction to the rate.
Meanwhile, the system would become more generous to basic rate taxpayers – who currently get 20 percent tax relief.
The think tank The Resolution Foundation has said that the move would save the government £4billion a year, it’s reported.
Adam Corlett, the foundation’s principal economist, said: “With the crisis set to leave a lasting mark on the public finances, the chancellor will need to substantially raise tax revenue once the economy has recovered.
“Long-overdue reform of pension tax relief makes sense given the potential savings involved, and the fact that it overwhelmingly benefits higher-income workers. This should include reform of the tax-free lump sum.
“Moving to a flat rate relief of 25 percent could raise several billion a year, while giving a boost to pension pots for the majority of workers. But the chancellor shouldn’t underestimate the complexity of delivering such a reform.”