Hammond homes in on pensions tax relief

Tax relief that encourages contractors and other pension savers to build up a nest egg has been seen in the sights of Philip Hammond, the chancellor, ahead of his autumn Budget 2018.

Targeting top earners, by tightening the annual allowance or the lifetime allowance, has been described by a contractors’ adviser as a “perennial story” for media titles to run.

But Mr Hammond now reportedly regards the £40,000 and £1million thresholds (only above which tax is levied on pension contributions) as “the last remaining pots of gold we can raid.”

Reducing the thresholds, which the adviser - CMME - has said contractors use as a ‘valuable tool for tax-efficiency,’ would help the chancellor fulfil a £20billion NHS spending vow.

And despite HM Treasury reporting better than expected tax receipts returning the biggest July surplus for 18 years, it would also show a revenue-hungry Mr Hammond to be making firms (not just people) pay their ‘fair share.’

This is because, when floated previously, cuts to higher rate tax relief on pensions were envisioned as being made via tax returns, so that company contributions could be caught too.

At present, contractors can invest up to £40,000 per tax year either personally or via their limited company, with a tax saving equating up to 64% because for every £100 invested, the contractor pays just £36 and the taxman pays the rest.

Editor's Note: Related --

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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