Pensions: Taxation

Treasury written question – answered on 30th April 2008.

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Photo of Rob Marris Rob Marris PPS (Rt Hon Shaun Woodward, Secretary of State), Northern Ireland Office

To ask the Chancellor of the Exchequer what estimate he has made of the number of people who would be affected if pension contributions were allowable for tax relief only against the basic rate of income tax; and what estimate his Department made of the effect on receipts to the Exchequer of allowing relief on pension contributions at the standard rate of income tax only in (a) 2005-06 and (b) 2006-07.

Photo of Angela Eagle Angela Eagle The Exchequer Secretary, Member, Labour Party National Executive Committee

Latest detailed estimates of the annual cost of tax relief on registered pension schemes are available in Table 7.9 on Her Majesty's Revenue and Customs website at:

http://www.hmrc.gov.uk/stats/pensions/menu.htm

If the relief on individual contributions were constrained to the basic rate of income tax, this relief would fall by one quarter.

Latest estimates of the number of individuals receiving income tax relief on individual pension contributions are given in Table 3.8 on HMRC's website at:

http://www.hmrc.gov.uk/stats/income_distribution/menu.htm

If the relief on individual pension contributions were constrained to the basic rate of income tax, the proportion of such taxpayers that would be affected is one quarter.

These estimates relate to individual contributions to both personal and occupational pensions. We have not estimated the impact of charging to income tax employer contributions to private pensions made for the benefit of employees who are liable to the higher rate of income tax. The estimates do not account for behavioural effects, which are likely to be large.

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