𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Rachel Reeves is said to be plotting a huge £4billion pension tax raid in her Budget later this month. The Chancellor is believed to want to axe fiscal breaks available to staff and employers who save cash in workplace pensions, which could cost the average worker £210 a year. “Salary sacrifice” schemes mean Brits can put money into their retirement pots before it is subject to income tax or national insurance.

Firms also enjoy lower employer national insurance contributions when staff take advantage of this, because the levies are only charged on pay left over. But Ms Reeves is reportedly preparing to change the national insurance relief by changing the maximum amount of an employee’s wages that can be deposited without paying up. Someone on £35,000 a year and contributed 5% of their wages into a pension would pay £210 more in national insurance if exemptions were scrapped, analysis has shown.

Employers would face a bill of £242 if they matched the contribution, The Telegraph reports.

Earlier this week, specialists warned that a raid on pension tax relief by Reeves could hammer the nation’s savings by £50billion and hit investment, growth and income in retirement for millions.

The system currently works out at 20% for most earners.

But for those more wealthy with an income of over £50,000, it is around 40% to 45%.

Previous studies have discussed the Treasury setting a flat rate of relief for everyone, for example, at 25%.

Lower earners would benefit from more relief, but the change would mean higher earners have less.

It has been suggested that the Chancellor could be seeking a raft of tax hikes and spending cuts at the Budget on November 26.

It comes after Ms Reeves hiked the amount of national insurance employers have to pay in her first Budget.

The Institute for Fiscal Studies warned Ms Reeves in October that restricting income tax relief on pension contributions “should be avoided”, also cautioning against an annual wealth tax, which it says would penalise savers, or increasing stamp duty.

Experts added that she could raise tens of billions of pounds from tax reforms without breaking Labour’s manifesto pledges.

However, the Chancellor must avoid “half-baked fixes” to Britain’s economic woes at the Budget, leading economists warned.

The Government is under pressure to balance the public finances ahead of November’s autumn statement amid warnings of a black hole estimated to be as much as £50billion.

Isaac Delestre, a senior research economist, told PA: “Almost any package of tax rises is likely to weigh on growth, but by tackling some of the inefficiency and unfairness in our existing tax system, the Chancellor could limit the economic damage,” he said.

“The last thing we need in November is directionless tinkering and half-baked fixes. There is an opportunity here.

“The Chancellor should use this Budget to take real steps down the road towards a more rational tax system that is better geared to promoting the prosperity and well-being of taxpayers.”