Chancellor Philip Hammond is expected to announce cuts in the Budget to pensions tax relief to help fund the NHS.
The Telegraph reports a senior Treasury source has confirmed tax free contributions will be stripped back to unlock the extra cash for healthcare.
In June the government promised to spend an extra £20bn annually on the NHS by 2023 and, in July, reports surfaced the government was considering how this could be done.
It is understood the Treasury started to investigate the flat-rate proposal that says a single rate could raise an additional £4bn in revenues.
Tax relief is currently assigned in line with a person’s marginal rate of income tax, which distributes relief towards higher earners and costs the government around £40bn a year.
A flat rate of 28 per cent has been proposed by the Resolution Foundation to help millennials save for later life and the Royal Society of Arts has suggested a 30 per cent rate to help the self-employed.
Royal London policy director Steve Webb says reform of tax relief is more likely to happen this year as the government faces more spending pressures and alternative sources of taxation are not available.
This includes fuel duty and changing national insurance contributions for the self-employed which the government reversed course on in September.
Webb adds any reform of tax relief, if it does occur, will not be a radical move to a single rate but involve more conservative tinkering to the annual allowance and lifetime allowance.
Cicero Group executive chairman Iain Anderson says: “The folder on scrapping higher rate relief has been in the chancellor’s in-tray since he arrived in the Treasury. So all the economic analysis has already been done.
“It remains an attractive option for a chancellor looking to make a bold commitment towards public spending and it would play well to the prime minister’s mantra of a country that works for everyone. The idea to create a single flat rate relief for all is the most widely talked about.”
The Treasury declined to comment.