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Pensions allowance may be cut to £40,000

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Pensions allowance may be cut to £40,000

Chancellor George Osborne may cut the annual tax allowance for pensions savings to £40,000, according to a report in the Financial Times today.

The newspaper said that Osborne has told colleagues he is prepared to accept a further reduction in principle.

The cut, if it is announced in the Budget Statement next week, would be likely to anger some Tories, and would follow the previous reduction in the annual pensions tax allowance from £255,000 to £50,000, which took effect in the 2011-12 tax year.

The government is seeking ways to fund an increase in the income tax threshold, which has already been increased from £7,475 for the 2011-12 tax year to £8,105 for 2012-13. There are suggestions it could be raised further to £10,000.

The chancellor will make his Budget Statement on Wednesday 21 March.

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