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Pension Tax to Fund NHS

The Treasury is considering whether to introduce a flat-rate of pension tax relief to help fund the National Health Service.


According to a report in The Times, the Treasury has started to investigate the flat-rate proposal and says it could raise an additional £4bn in revenues.

In June, the government promised to increase spending on the NHS by £20bn a year and a flat rate could help chancellor Philip Hammond raise money without breaching fiscal rules.

Tax relief is currently assigned in line with a person’s marginal rate of income tax, which distributes relief towards higher earners and costs the Government around £40bn a year.

A flat rate of 28 per cent has been proposed by the Resolution Foundation to help millennials save for later life and the Royal Society of Arts has suggested a 30 per cent rate to help the self-employed.

Towards the end of June, the government said it will “examine the process for payment of pensions tax relief” in response to concerns low-paid workers in net pay schemes are losing out.

No further detail has yet been released on this proposal, nor has any timescales been mentioned. We will watch with interest.