Andy James, head of retirement planning at Tilney, comments on the HMRC's estimated cost of pension tax relief reaching £41bn23 January 2018
“The HMRC has today announced an update in its forecast on the cost of pensions tax relief for employers, which is now shown to be £950m higher than previously estimated. This is not actually a huge surprise as tax relief costs are only going one way at the moment – up!
“Auto-enrolment increases which have been geared in for the next two years will also increase pension contributions and therefore tax relief. Ideally, the government would keep control of these costs, but their ability to do so at the moment is hampered by their lack of majority and the focus on Brexit.
“The last Budget was the first of this Parliament, when you might have expected any ‘bad news’ to be factored in. However, there was nothing on pensions tax relief, so it remains to be seen whether the Chancellor is willing to allow the increasing impact on the Exchequer for the rest of the Parliamentary term. However, with vocal calls for more cash urgently for both the NHS and the armed services, this issue could be revisited.
“Irrespective of this, a change in government could throw a spanner in the works, as the current Labour leadership is clearly enthusiastic about the idea of wealth taxes. Therefore the current system of tax reliefs – especially those that favour higher tax payers – should not be taken for granted and those able to benefit should utilise these reliefs where they can.”
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