Green budget - Pension tax warning
The government?s pre-budget report next Tuesday could mark the end of tax-free lump sums on retirement and an overhaul of double taxation relief, accounting experts warned this week.
Nick Gibb, a chartered accountant and Conservative frontbench spokesman for the Treasury, claimed the government was considering imposing a tax on the lump sum available for pensioners as well as a reducing tax relief for pension contributions to the basic rate. ?We?ll oppose tooth and nail a tax on the lump-free sum for pensioners. It?s a gross attack on their retirement plans,? he warned.
But the consensus from tax experts was that the chancellor?s preoccupation with the current state of the economy would be reflected in cautious tax reforms. Outlining the most likely changes, John Whiting, a tax partner at PricewaterhouseCoopers, highlighted a new individual tax on workplace parking spaces and further taxes on road use.
He added that the government was likely to publish a consultative document on double taxation relief. In the Budget last March, the chancellor said the UK government gave #5.3bn in double tax relief every year – something Whiting feared was a prelude to a reduction in relief. ?I think there is a good deal of general concern in the industry that if the chancellor mentions such a figure it becomes a target.?
His concern was echoed by Mukesh Gunamal, chairman of ACCA?s tax committee. ?A modernisation of the system is welcome but not if it complicates the system. If tax relief is restricted it will restrict investment.?