Govt considers cut to pension tax relief annual allowance

George Osborne 480

The Government is considering cutting the maximum annual tax-free pension contribution limit in next month’s autumn statement.

According to the Financial Times, chancellor George Osborne (pictured) met with senior coalition members on Monday to discuss the Government’s proposals. Osborne has previously pledged to balance welfare cuts with new taxes on the wealthy.

A source told the FT that moves to reduce pensions tax relief for the wealthy are “on the table”.

In the 2010 emergency Budget, Osborne cut the maximum tax-free pension contribution from £255,000 a year to £50,000, although the Government previously consulted on introducing an annual limit of between £30,000 and £45,000.

The FT says a £40,000 limit would raise £600m, while a £30,000 limit would raise £1.8bn.

Prime minister David Cameron has reportedly blocked calls for a new council tax band for the most expensive properties and opposed the introduction of a mansion tax.

In March, shadow chancellor Ed Balls called for pension relief for higher rate tax payers to be capped at 26 per cent, with the extra revenue spent on reversing cuts to tax credits.

The Liberal Democrats support the axing of higher rate pension tax relief altogether.