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Dennehy warns of possible higher rate pension tax relief axe

Dennehy Weller & Co has warned clients that higher rate tax relief on pension contributions could be abolished in next week’s Budget.

The firm has written to clients suggesting they bring forward planned contributions to ensure they receive the 40 per cent tax relief currently available.

Money Marketing reported in March that the Government was investigating ways to fund an increase to the Isa limit and that changes to tax relief on pensions were understood to be on the table.

Managing director Brian Dennehy says: “There is no doubt that the Government, and its finances, are under huge pressure.
Gordon Brown is going to have to introduce unpopular measures and it is difficult to see how higher rate tax relief on pension contributions, a perk for the rich, can be sustained. There is nothing to lose in bring forward contributions and a significant chunk of tax relief can be locked-in.”

Killik & Co has written similar letters to its clients.

The Liberal Democrats support axing higher rate tax relief while the work and pension committee called for a review of relief bands in 2006. It is estimated the Treasury could save around £2.3bn from the move.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “I do not see why you would need to rush. In the unlikely event that they do scrap the relief I doubt it would apply until next tax year. If they bring it in this tax year, anyone who has made contributions since April 6, will not get higher rate relief anyway.”

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