Ministers have discussed reducing the rate at which income tax relief is applied to Britain’s 5.5 million higher-rate taxpayers from 40p to a flat rate as low as 20p. Another option being considered is to increase the number of very high earners whose income tax relief is cut even further.
The total cost of pension tax relief to the Exchequer is £42.7 billion, of which £22.9 billion is relief on income tax and £19.8 billion is on National Insurance contributions.