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Politicians pledge radical changes to income tax
A pledge by Boris Johnson, in the running to be leader of the Conservative Party, to cut income taxes for a large number of people should he become prime minister isn’t necessarily positive for many people’s retirement savings.
His pledge to raise the higher-rate income tax threshold from £50,000 to £80,000 would see higher earners pay up to £6,000 less in income tax each year.
However, the move would be negative for pension savings as the tax relief on contributions for those earning between £50,000 and £80,000 would drop from the current 40% rate to 20%.
In such a situation, individuals affected by the changes would no doubt be encouraged to use some of their income tax savings to top up their retirement pot to help ensure they have sufficient funds in later life.
Labour leader Jeremy Corbyn wants to lower the 45% tax rate from £150,000 to £80,000, and then introduce a new highest 50% rate on individuals earning £123,000 or more.
Dominic Raab, another Tory party leader hopeful, wants to help low paid earners by increasing the rate of which national insurance becomes payable, from £8,628 to £12,500. He also wants to reduce income tax by 1% a year until it hits 15%.