HM Treasury has refused to confirm that it is considering the introduction of a flat rate for pension tax relief in a bid to free up funds to support the NHS.
According to a report in The Times on the weekend (7 July), this is one of a number of options under review by the Treasury, since Prime Minister Theresa May gave Chancellor Philip Hammond free rein to find ways to cough up an extra £20.5bn in funding for the NHS.
But the Treasury did not want to confirm whether it has opened an investigation into the matter, as has been reported.
A spokesperson at the Treasury told FTAdviser: “As the prime minister has made clear, taxpayers will have to contribute a bit more, in a fair and balanced way, to support the NHS we all use.
“We will listen to views about how we do this and will set out plans at future fiscal events.”
Mrs May announced a new five-year NHS funding plan in June, with money coming partly from the cash the government will no longer be spending on the annual membership subscription to the European Union after Britain has left.
The remaining funds will come from taxpayers, with pension experts expecting a “salami slicing of pension tax relief”.
It is believed introducing a flat rate of pension tax relief would raise about £4bn a year for the NHS.
A shift to a single rate of pensions tax relief was considered by the government in 2015, and was due to be implemented in the 2016 Budget.
However, at the time, Chancellor George Osborne didn’t announce any fundamental change to the tax treatment of pension on the grounds that there was ‘no consensus’.
A recent report from the Royal Society of Arts (RSA) think-tank – led by former Labour adviser Matthew Taylor – concluded that 40 per cent of government spending on pension relief goes to the top 10 per cent of those claiming it, who earn £70,000 a year or more.
The think tank urged the government to introduce a 30 per cent flat rate of tax relief, which "would be progressive, cost-neutral and leave three-quarters of earners better off".
maria.espadinha@ft.com
