Chancellor Sajid Javid is reportedly considering cutting pensions tax relief for high earners in next month's Spring Budget.

Media reports suggest Javid may be on the verge of reducing high earners' relief from their marginal rate of income tax to 20% to make the system fairer for lower earners.

Currently, savers get pensions tax relief when they put money into their pension and are liable for tax when they receive income from a pension.

The tax relief on a saver's pension contributions can be reclaimed at the saver's marginal rate of income tax.

This enables those in the higher or additional-rate bands to claim the relief at 40% or 45% in England, Wales and Northern Ireland.

At present, the system is believed to cost the Treasury around £35 billion a year in lost income tax revenue and the reform could raise £10bn a year.

Steven Cameron, pensions director at Aegon, said:

"Rushing to cut pensions tax relief could do long-term damage to Britain's retirement savings, so we urge the Chancellor to avoid going too far, too fast.

"If the relief is cut, people will change their behaviour and might not bother saving using a pension."

Talk to us about pension planning.

Plus Accounting light logo

Subscribe To Our Newsletter

Join our mailing list to receive the latest news and updates from our team.

By submitting your details you agree to receive email marketing from Plus Accounting and have read and understood our Privacy Statement & our Terms & Conditions. You can withdraw your consent or change your preferences at any time by emailing us or by clicking the link at the bottom of every email we send you.

You have Successfully Subscribed!