Chancellor Philip Hammond is set to announce cuts to pensions tax relief in his Budget later this month in order to raise revenue to pay for NHS funding commitments, according to reports.
Hammond is currently considering either cutting the rate of relief or reducing the tax-free annual allowance, The Telegraph reported, to help fund a £20bn boost to the NHS that prime minister Theresa May announced in June.
The newspaper cited a “senior Treasury source” as claiming the £39bn annual cost of tax relief could not be ignored when seeking methods to fund the promise to the health service.
The speculation comes after the Treasury select committee earlier this year called for “fundamental reform” of the tax relief system. In a wide-ranging report on household finances, MPs on the committee said incremental changes could be made to increase fairness in the system, including moving to a flat rate of relief, as well as replacing the lifetime allowance with a lower annual allowance.
Hammond’s Budget is due to be delivered on 29 October, and predictions have already begun over potential pensions changes. Barnett Waddingham senior consultant Malcolm McLean said a move to a 25% flat rate of tax relief was much more likely at this Budget, but also felt the annual allowance could be halved.