Why Invest Before the Budget?
Please note this blog post was published over 12 months ago and so may not include the most up-to-date information, for example where regulation around investing has changed.
The Chancellor of the exchequer presents his latest budget on Monday, and you may want to think about investing now before any potential changes to Pension tax relief.
There’s no way to know for sure what the Chancellor Philip Hammond has in mind, but there is the possibility that he could choose to cut pension tax relief. He recently commented that tax relief is “eye wateringly expensive” and costs the Treasury £39 billion a year. The Telegraph has described this as a “clear hint it will be cut in Budget.”
With this in mind, you may want to bring forward any planned contributions for this tax year. Beat the Chancellor, beat the taxman, and do more with your money.
Currently, when you pay into a pension, your contribution is boosted by tax relief. For a Basic Rate tax payer, this is an additional 20%, Higher Rate tax payers get 40% relief and Additional Rate taxpayers 45%. Basic tax relief is claimed on your behalf, but the Higher and Additional Rates must be claimed on an annual tax return. The current allowance for investing in a Pension each year for the majority of people is £40,000.
So, why is the Chancellor considering changes to tax relief? The idea is that this will raise additional money for the treasury in a time when some extra cash would be useful. Rather than giving tax relief to high earners, the government could instead allocate this money elsewhere. The Chancellor has a balancing act, and it will be interesting to hear what measures he announces in this latest budget.
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