“The lifetime allowance could also potentially be reduced, although given it has already been frozen for the rest of this Parliament at just over £1mn this seems unlikely.”
Death taxes
If the chancellor wants to raise money from wealthier people, he could turn his attention to taxes paid on death, according to AJ Bell.
Currently, pensions can currently be passed on tax-free on death if the person dies before age 75, and at your recipient’s marginal rate of income tax if you die after age 75.
Suter explained that applying a tax to inherited pensions would clearly raise much-needed cash for the Treasury, although how much would depend on whether a protection regime was introduced for existing funds or not.
“If it wasn’t, those who have paid into pension on the basis of the death benefits on offer would understandably feel angry at the rug being pulled from under them,” she said.
“Inheritance tax is the other lever the Treasury could pull, either by increasing the current 40 per cent rate or lowering the amount that can be inherited tax-free. Both measures would inevitably lead to ‘death tax’ headlines, however – not something politicians generally welcome.”
sonia.rach@ft.com
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