The change would cost average UK workers around £210 a year, according to reports.
Reeves targeting pension salary sacrifice (Image: Getty)
Tax breaks on workplace pensions are set to be scrapped, targeting the “salary sacrifice” scheme and forcing some pensions into higher rates of taxation. Chancellor Rachel Reeves is reportedly expected to announce the change to the scheme, which currently allows workers to put money aside into their retirement pots, before it can be subjected to income tax and National Insurance.
The change would cost average UK workers around £210 a year, according to reports. It would amount to another change to National Insurance, after Ms Reeves increased by £25billion the amount employers pay in the last Budget. This is despite the Labour Party promising on 52 separate occasions not to raise taxes on working people during the 2024 General Election.
It is understood that Ms Reeves is considering limiting the National Insurance relief scheme to £2,000 per annum for both staff and employers’ contributions to pensions.
However, the Daily Telegraph revealed that the government has no idea how many workers are actually on such schemes, and therefore does not know how many people will be affected by the proposed change.
Sarah Olney, a Liberal Democrat MP and their spokesman on Business, asked Ms Reeves to confirm what information the Treasury has on workers making use of salary sacrifice schemes.
She was informed by the Treasury Minister Dan Tomlinson MP that: “HMRC does not hold administrative data on the number of employers offering and employees using salary sacrifice schemes.”
The changes mean that millions of British workers are set to lose money to line the Treasury’s coffers as part of a Budget that is rumoured to send taxes skyrocketing.
During the general election, Labour politicians made repeated promises not to raise National Insurance, Income Tax or VAT.
Ms Olney told the Telegraph: “It’s outrageous that Rachel Reeves is planning to tax salary sacrifice schemes without having any idea how many people her decision will impact. As if we needed more reasons not to trust this Treasury.
“It will be a kick in the teeth to the millions set to tighten their belts this winter that the Government is playing so fast and loose with their savings.
“This afternoon the Chancellor must choose to fill the hole in the public finances by fixing our broken relationship with the EU, rather than crippling those already hit by a cost-of-living permacrisis.”
Andrew Griffith, the shadow business minister, said: “Businesses have long suspected she is making decisions without understanding the numbers – but it is still a shock to have this confirmed.”
