Tax experts bash Lib Dem pensions talk
CUTTING tax relief on pension contributions for higher-rate tax payers risks unfairly over-taxing savers, and sends out the wrong signals about how Britain treats successful workers, experts at accountancy firm Baker Tilly warned yesterday.
Chief secretary to the Treasury Danny Alexander has suggested top-rate taxpayers could lose half of the tax relief on their pension savings, effectively boosting the state’s coffers by up to £7bn per year.
Alexander described the amount spent on tax relief as “very significant,” telling the Telegraph “the country cannot afford to give you all the tax relief. We are asking those with the broadest shoulders to bear the greatest share of the burden.”
Currently taxes are only levied when the pension is paid out – not on contributions, or the pot as it grows.
Changing that so higher-rate payers are taxed at the basic rate on pension contributions and then taxing the income into retirement is not fair, Baker Tilley’s George Bull told City A.M.
He also questioned Alexander’s approach to the tax system as a whole.
“I believe in a progressive tax system where the rich pay more than the poor, but the top 10 per cent of earners already pay more than 50 per cent of the income tax.”
“If we are going to ramp up the progressive nature of the tax system, it must be done in the context of a balanced target – not just picking off one rich target and moving onto the next.”
Bull also expressed concern at the impact a series of high-profile attacks on high-earners has on the UK’s image.
“This is getting to look a bit like the politics of envy, and risks scaring off businesses and more mobile workers.”
The Treasury insisted Alexander was speaking as a Liberal Democrat, not as a representative of the government.
Yesterday the Treasury was reported to have ruled out tax breaks for married couples in next month’s Budget, angering conservative MPs.