SAVERS and pensions providers are calling for a rethink over an anticipated tax raid on pension pots in the upcoming Budget.
From 6 April, the government is set to impose reduce the maximum amount of pension wealth savers will be allowed to accumulate during their lifetime. While the cap is currently £1.5m, it is set to drop to £1.25m. Anyone who breaches that limit will face a tax charge of up to 55% on the excess.
Previous opportunities to tap into pensions’ capital reserves have generally been passed up due to the political unpalatability of such a move. However, removing higher rate income tax relief for pension contributions could yield as much a £5bn, at a time when the chancellor (pictured) is working to plug a £20bn black hole in the public purse.
The way the levy is expected to work for someone with a pot of £1.5m would see them withdraw £250,000 excess in a lump sum, minus a 55% tax charge of £112,500.
HMRC has recouped more than £230m in charges from retired people caught out by the introduction of a cap on lifetime pension savings, according to official figures.
A Freedom of Information request submitted to HM Revenue & Customs, the Financial Times reports, showed nearly 4,000 individuals faced tax bills averaging almost £50,000, between 2007/08 and the current financial year.
BDO tax partner Richard Rose said dropping the cap would be “an easy revenue raiser”.
“[Dropping the lifetime allowance cap] Hits the higher earners. The timing of this may now be right for the Government to weather any political backlash.”
HMRC has outlined a change in VAT policy to the treatment of dwellings that have been formed from either the construction of new buildings, or from the conversion of non-residential buildings
Let us hope that valuable asset protection vehicles are not made prohibitively burdensome or abolished in the desire to “simplify” IHT
The government is pressing ahead with changes to the way it taxes individuals with a foreign domicile
I will feel slightly awkward when I write to the client who is about to receive a large invoice from the PAYE expert, offering him the fee protection going forward