Tax "perk" for rich could be removed in Budget

A tax break currently enjoyed by high net worth Britons could be ended in the upcoming Budget, a leading IFA has warned.

Dennehy Weller & Co said that the chancellor could announce next week the ending of tax relief on pension contributions for those who pay the higher band of income tax.

This follows Alistair Darling’s announcement last year, during his pre-Budget report, that the 40p band will be increased to 45p from 2011.

The current financial crisis and economic downturn is largely responsible for the changing government tax policies.

Falling tax revenues and rising unemployment, along with the cost of bank bailouts and fiscal stimulus schemes, are leading to increased deficits in the public finances.

The IMF recently predicted that the public debt would swell to over ten per cent of GDP next year.

Tax increases could provide additional revenue for the government in the future, helping it to pay back these debts.

’If Gordon Brown is also going to have to introduce unpopular measures (if he doesn’t do it next week he is simply putting off the day), it is difficult to see how higher rate tax relief on pension contributions (a perk for the rich?) can be sustained,’ the IFA said.

’We are suggesting that clients consider bringing forward planned regular and/or lump sum contributions, and make them ahead of the Budget - there is nothing to lose in doing this, and a significant chunk of tax relief can be locked-in.’

The Budget will be announced on April 22nd.ADNFCR-2318-ID-19124081-ADNFCR