Chancellor Phillip Hammond is rumoured to be mulling a tax raid on pension savers to partly fund his promised £20 billion of extra cash for the National Health Service.
Cuts to pension tax relief have been one of the main topics of Budget conversation for years.
The sums seem simple even for a chancellor known as Spreadsheet Phil.
The Treasury pays out £39 billion a year in pension contribution tax relief – the amount the government pays to top up pension savings.
Hammond needs £20 billion by 2023 to keep his NHS spending promise.
He is unlikely to wipe out tax relief completely because this would undermine government encouragement to workers to save for their retirements.
But he could set a flat rate of relief rather than pay savers at their marginal rate – 20% for basic tax payers, 40% for higher rate tax payers and 45% for those paying at the additional rate.
Various think tanks and financial experts have highlighted pension relief as low-hanging fruit for the chancellor to pluck.
They point out that mainstream voters are unlikely to worry about the tax problems of high earners, so moving in on their tax relief is no political loss for a Tory chancellor.
Steve Webb, a former pensions minister, who is now director of policy at financial firm Royal London, feels a flat rate of pension tax relief ‘looks unlikely’, with a reduction in the annual allowance more feasible.
“The potential to raise taxes through other means such as income taxes looks quite limited,” he said.
“The fuel duty freeze has been confirmed, while the government has previously cancelled plans to increase national insurance contributions. For all these reasons they will look at pension tax relief, as they do every year, but perhaps this year they will be looking a bit harder.
“But I do not believe we will see a flat rate of pension tax relief being introduced. It is such a big project and there will be plenty of losers. I don’t think it is something a politically weak government can introduce at this time.”