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Will Chancellor George Osborne turn the pension scheme on its head when we delivers the Autumn state

Will Chancellor George Osborne turn the pension scheme on its head when we delivers the Autumn statement on November 25? - Credit: PA

The Chancellor of the Exchequer is this week preparing to deliver his autumn statement and a series of short-term wins for the Treasury are expected.

“It may upset some people,” said Keith Senior, a director at Jacobs Allen Chartered Accountants & Chartered Tax Advisors, as he discussed his predictions for the autumn statement.

“Changes to working tax credits will have an impact for some people, although it may not be that immediate. However, cuts are virtually inevitable.”

Mr Senior believes the real area of concentration will be around the taxation of personal service contracts and pension contributions.

“There is potential for a further cut in tax relief on pension contributions over what has already been announced.

“At present, people can contribute £40,000 a year to their pension schemes and get full tax relief against their earnings.

“We have been told previously that from April 2016, those earning more than £150,000 per annum will see that tax free allowance gradually cut to £10,000, and it has been suggested the Chancellor is looking to move the goal posts again.”

Mr Senior believes there is a possibility we could in future see a radical change with a complete shift in how pensions are taxed, but for now the tax relief on pension contributions might be restricted further for high earners and employer contributions, as it is those that gain the most benefit from tax relief.

That would collect more tax now and be focussed on more wealthy individuals.

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“I suspect that would have a massive impact on peoples’ interest in paying into pension schemes because it would be up to 30 years before they see the tax benefits of their saving,” said Mr Senior.

He admitted this would give government coffers a short-term boost but could be detrimental in the long term.

“It seems they are trying to get money in quickly so they can do away with the deficit, and they will worry about tomorrow in a few years time.”

Mr Senior also believes the government is likely to follow up on a commitment to take action against individuals who provide their services through personal service companies, after a consultation process earlier in the year. This firmer stance will also tackle the claiming of travel and subsistence expenses by those workers who are contracted as effectively self-employed for long-term projects.

“It will mean more people will be classed as employees and will be charged tax at source. Rather than putting the onus on the individual to decide if they are a contractor who is caught by existing legislation that has so far proved less than effective, they want to put the onus on the end customer. Interestingly, such action will have to be finely crafted if it is to prevent certain other forms of tax avoidance becoming more attractive to those affected.”

For more advice on how the budget could affect you, contact Jacobs Allen, based in Bury St Edmunds and Haverhill, by calling 01284 704260, or visit their website