While Labour’s manifesto pledged not to raise income tax, National Insurance, VAT, or corporation tax for “working people,” ministers have hinted at exploring other “fairness-based” measures within the existing tax system. These could include levelling pension tax relief across income brackets or restricting salary sacrifice arrangements.
But reports indicate that officials are now reviewing proposals for a flat 30% rate of pensions tax relief, a policy previously supported by Rachel Reeves in 2016 as a backbencher. If implemented, this could generate up to £2.7 billion in revenue – while redistributing some advantage away from higher earners.[1]
“Many clients are already asking what a potential change in pensions tax relief might mean for their long-term plans,” says Brian Morman, Director at Brunsdon Financial. “While no official reforms have yet been announced, it’s a good time to review your pension strategy and make sure it remains tax-efficient.
Another area under scrutiny is salary sacrifice – a commonly used mechanism that can allow employees to exchange part of their salary for pension contributions or other benefits, reducing their overall tax liability. Treasury officials are reportedly reviewing this amid concerns that it disproportionately benefits higher earners. [1]
While Reeves has ruled out a full-blown wealth tax, suggestions remain on the table to increase Capital Gains Tax (CGT) or remove certain Inheritance Tax (IHT) reliefs. According to Judith Freedman, Emeritus Professor of Tax Law and Policy at Oxford University, “Pensions are a big area that needs reform, but this needs careful planning if anything is to be changed.” [2]
In the meantime, no firm announcements will be made until the Autumn Budget 2025, but with growing public finance pressures and political commitment to “fiscal discipline,” change seems likely.
Stay informed. While no changes to pension tax relief have been confirmed, now is a valuable opportunity to review whether your current pension arrangements are aligned with your retirement goals.
At Brunsdon Financial, we help clients plan with confidence — focusing on financial security, flexibility, and peace of mind. By ensuring your pension benefits support the lifestyle you want in retirement, we can help you remain in control, whatever changes may come in the future.
