Hammond hints at cut to pension tax breaks
Chancellor calls tax breaks ‘eye-wateringly expensive’ in clear sign of changes to come in the Budget
Pension tax breaks have become “eye-wateringly expensive”, Philip Hammond has said, in a clear indication they could be cut in the Budget. The Chancellor said taxes would have to rise to pay for the “very large commitments” made before the Budget, including a £20billion funding boost for the NHS. He made clear that pensions tax relief, which costs the Treasury £39billion a year, is likely to be cut in a move that will provoke opposition from Tory MPS.
PENSION tax breaks have become “eye-wateringly expensive”, Philip Hammond has said, in a clear indication they could be cut in the Budget.
The Chancellor said that taxes would have to rise to pay for the “very large commitments” made before the Budget, including a £20billion funding boost for the NHS. He made clear that pensions tax relief, which costs the Treasury £39billion a year, is likely to be cut in a move that will provoke opposition from Conservative MPS.
The Daily Telegraph disclosed earlier this week that Mr Hammond was preparing to cut pensions tax relief. Pension contributions benefit from relief paid at the saver’s highest rate of income tax. For example, it costs a basicrate payer £80 to make a £100 pension contribution, while a higher-rate taxpayer pays just £60 for the same effect and an additional-rate taxpayer £55. It is understood the tax relief is likely to be amended in one of two ways – either by cutting the tax-free annual allowance, or by lowering the rate of relief.
Asked about reforms to pensions tax relief at the IMF’S annual meeting in Bali yesterday, Mr Hammond said: “My general feeling on pensions tax relief is that it is eye-wateringly expensive.”
The Government is also preparing for a crackdown on workers who claim they are self-employed while working for a single employer, paying significantly less tax. Mr Hammond said: “In the interest of fairness, we need to ensure that two people working side-byside doing the same job for the same employer are paying broadly the same tax.”
The Chancellor is also considering ditching a manifesto commitment to scrap a proposed income tax cut to pay for a climbdown on Universal Credit.
The Government is under mounting pressure to find an extra £2billion to ease the roll-out of the benefit scheme after ministers admitted that some people will be left worse off. The Telegraph disclosed yesterday that the Government could postpone a pledge to raise the personal allowance for income tax from £11,850 to £12,500 by 2020. It came as George Osborne, the former chancellor, said that Mr Hammond will struggle to pay for the NHS funding boost and bolster Universal Credit by raising taxes.
He told Channel 4 News: “The most difficult times I had as chancellor, politically, were not about public spending cuts – they were about tax rises.
“These were the real political troubles I found myself in and had to reverse out of. And I suspect, for all this talk that you could suddenly find many tens of billions of pounds more for the public services, the truth is it’d be difficult for any government to find the tax base to do that.”
The Chancellor also said that the Government is not planning to tackle the dominance of Amazon and Facebook with an online sales tax.
Mr Hammond should slash stamp duty for older people so they can downsize and free up more family homes, a leading estate agent said. Paul Smith, Haart’s chief executive, urged the Chancellor to do more to help families who are unable to buy larger properties. Mr Smith wants a stamp duty cut for “downsizers” who are deterred from moving by the costs involved.