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Coalition ups the ante on executive pensions

28 Jul 10

Treasury consultation could see personal allowance reduced to as little as £30,000

Planned restrictions on tax relief for the pensions of high earners may be even more severe than those planned by the previous Labour Government, if measures outlined in a new Treasury consultation document are carried through. The document deals with pensions tax relief among a raft of other tax measures outlined in June’s emergency budget.

Under the plans, each person’s tax-free “personal allowance” will be cut from £255,000 a year to between £30,000 and £45,000. Although the move would considerably boost tax take, it would also mean many more savers caught in the pensions tax net.

But the move has been welcomed by the National Association of Pension Funds (NAPF) which praised the Treasury’s “simpler approach” and argued lowering the bar would encourage high earning individuals to stay in – and thereby strengthen – their workplace pension schemes.

Other areas covered by the consultation include PAYE reform, disclosure of IHT avoidance and Modernisation of Investment Trust Company rules.

The Exchequer Secretary, David Gauke MP, said:
"We want to make the tax system simpler and work better for the taxpayer. By reducing burdens, making the right choices and involving taxpayers, we are sending a very clear signal that Britain is open for business.

"We are committed to a more considered and open approach to tax policymaking. That is why consultation and scrutiny of our tax policies will be the cornerstone of our tax policymaking process. I want to encourage relevant parties to provide their feedback on the tax consultations that we have published today"

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