Business owners and high earners are being warned to take pre-emptive action ahead of next month’s Budget.
Alan Mellor, Managing Director of Cheshire-based Chartered Financial Planners Phillip Bates & Co Financial Services, says the Chancellor could announce further pension changes in his Budget statement.
In his post-election Budget last year, George Osborne said he would cut the lifetime allowance of tax-free pension savings from £1.25million to £1million from April this year.
Currently, savings of over £40,000 a year and any pension pot of over £1.25million are subject to tax at 55 per cent.
Alan says the Chancellor may also be eyeing a further raid on pensions by limiting or scrapping pension tax relief – something it is believed could net the Treasury up to £34billion.
Alan, whose offices are in Neston, said: “Business owners and high earners are advised to seek advice before the Budget on March 16th.
“They could be hit by a double whammy of previous announcements which are due to take effect from April this year and potential further announcements, particularly around the levelling of tax relief.
“Higher rate taxpayers currently get tax relief for pension contributions at 40 per cent and businesses are able to pay into employees and get corporation tax relief. Both are believed to be under serious threat of removal.
“This means that any company or individual who is considering any pension contribution in the foreseeable future should, where possible, accelerate this to before March 16th.
“If the rate is cut to 25 per cent, it could make the difference of many thousands of pounds depending on whether someone acts now or after the Budget.”
Regarding lifetime and annual allowances, Alan added: “Everyone with savings in excess of £500,000 in personal pensions should be checking to see if they need to protect their savings from potential tax rates of up to 55 per cent.
“Anyone earning over £110,000 from all sources should be considering their position. Major changes are set to impact them from April, potentially leading to a tax bill of tens of thousands of pounds.”
Alan concluded: “The impact caused by changes to pension tax relief and lifetime and annual allowances can be mitigated with good planning, but the window to do so is rapidly closing.”