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Cable in call to axe high-rate tax relief

The Liberal Democrats want to axe higher-rate pension tax relief and end forced annuitisation at age 75.

In the party’s Tax Commission proposals Shadow Chancellor Vince Cable set out plans for a fundamental reform of the tax system last week under the slogan, Fairer, Simpler, Greener.

Cable says it is particularly difficult to defend higher-rate pension tax relief, describing it as a “direct subsidy to higher-earners”. The report highlights that half of the total benefit of pension tax relief goes to the top 10 per cent of earners and 25 per cent of the relief goes to the top 2.5 per cent.

It calls for a single rate of tax relief at the basic rate of income tax and Cable says he will consult with the industry on technical details such as how this would affect administration of defined-benefit schemes.

To placate high-earners, he says ending forced annuitisation at 75 would benefit people with big pension pots.

He says the LibDems would not change the existing tax relief for Isas as it is conscious of the need to encourage a savings environment.

Cable also proposes to slash capital gains tax relief to pay for a 2p cut in the basic rate of income tax and raising the top-rate tax band to £50,000.

He says: “Our package will radically shift tax and spending priorities while maintaining financial responsibility.”

Cicero Consulting senior associate Jacob Coy says: “The LibDems have made the first contribution to what promises to be a vigorous debate on tax. We can expect an equally interesting intervention from the Conservatives due out in the autumn.”

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