Shadow chancellor John McDonnell's £80,000 tax plan has pensions side effects, expert warns

 
Mark Sands
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Shadow Chancellor John McDonnell Delivers His Keynote Speech To Labour Party Conference
McDonnell ruled out tax rises for earners taking home less than £80,000 (Source: Getty)

The implications of Labour’s plan to raise income tax for working earning over £80,000 would be met “with horror” by pensions firms, one expert has warned.

Shadow chancellor John McDonnell said the party would only rule out tax hikes for those earning under £80,000 this weekend.

But Hargreaves Lansdown head of policy Tom McPhail said the plan has side effects, because pensions tax relief is based on income tax. As a result, higher earners can get more tax relief on their savings.

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“Given the ideological leanings of this Labour party, it is hard to see them being relaxed about actually increasing pension tax relief for higher earners,” McPhail said, warning the party could begin tapering off tax relief at £80,000, rather than at £150,000 as it does currently.

Such a plan, he said, “would be met with horror by employers and the pensions industry alike.”

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