HMRC plots crackdown on pension tax relief claimants under major overhaul

This comes amid reports that Chancellor Reeves is examining plans that would slash the current £268,275 tax-free withdrawal ceiling to potentially £100,000, with an even more severe option setting the limit at just £40,000.

The revenue service's crackdown follows an internal review revealing approximately one-third of relief requests contained errors, prompting stricter verification requirements to "protect taxpayers' money".

**ARE YOU READING THIS ON OUR APP? DOWNLOAD NOW FOR THE BEST GB NEWS EXPERIENCE**

HMRC's new measures target the approximately 80,000 annual Personal Pension Relief claims, particularly focusing on requests up to £10,000 where errors were most prevalent.

Common mistakes identified include non-higher-rate taxpayers incorrectly seeking relief, miscalculating contribution amounts, and attempting to claim for pensions already benefiting from full relief through net pay arrangements.

The changes will particularly affect those with personal pensions using "relief at source" systems, where only basic 20 per cent relief is automatically applied, requiring manual claims for the additional 20 or 25 per cent.

Helen Morrissey, the head of retirement analysis at, Hargreaves Lansdown warned that eliminating telephone claims could "present an issue for people who don't have online access and doing it by letter may well be quite a lengthy process".

Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.

Under the rumoured proposal being considered by Ms Reeves, the amount retirees can withdraw without paying tax would be reduced as Treasury officials explore fiscal avenues to address a fiscal gap exceeding £50billion.

Currently, pensioners can access 25 per cent of their retirement savings tax-free up to the £268,275 maximum.

The Institute for Fiscal Studies (IFS) projects that reducing the ceiling to £100,000 would yield approximately £2billion annually once fully implemented.

However, Treasury insiders suggest pension modifications are not a priority for the Autumn Budget.

MEMBERSHIP:

• MAPPED: Full list of local authorities housing hotel migrants - how many are in YOUR area?
• REVEALED: The 32 seats that could parachute Nigel Farage into No10 as General Election petition hits 800k
• Think Reform has gone soft? Farage's migration blueprint will leave you eating your words - Ann Widdecombe
• REVEALED: Panic stations for Keir Starmer as migrant hotel fury sparks ballot box revenge in 20 seats
• Lucy Connolly's release is a step in the right direction, but the screws are turning – Matthew Goodwin

This is despite the National Institute of Economic and Social Research (NIESR)indicating the Chancellor may need to raise over £40 billion through new revenue streams.

Those with £400,000 in retirement funds currently withdraw £100,000 tax-free, but would lose this entire benefit under the £40,000 proposal, facing approximately £24,000 in additional tax at higher rates.

LATEST DEVELOPMENTS:

• Tom Harwood dumbfounded as GB News guest says ‘tax the POOR’ to tackle inequality
• Tesco and Sainsbury's rally against Rachel Reeves's £7bn tax bill as 'prices will rise'
• 'Scrap the OBR!' Rachel Reeves called to take action as economy trapped in 'doom loop'

Millionaire pension holders face the steepest losses, currently accessing the full £268,275 tax-free but potentially losing £168,275 under the £100,000 cap or £228,275 with the £40,000 limit, translating to massive tax bills for affected retirees.

On HMRC ending phoneline applications, a spokesperson for the tax authority said: "We’re lowering the threshold to ensure that people claim the right amount of relief and protect taxpayers’ money.

"This comes after we conducted a review which revealed that many claims below the current evidence threshold were incorrect.

"Customers can quickly and easily make a claim, and provide supporting evidence, using our online form."