Some economists say it would be fairer to give the same level of relief for everyone.
Setting a flat-rate of relief at, say 25%, could benefit lower-earning employees who currently get 20% relief, by further reducing their tax bill.
However, higher rate taxpayers with an annual income of about £50,000 or more would lose out, because tax relief would be lower than now.
An added, but important, complication is that a huge group of public sector workers, and some in the private sector too, have so-called defined benefit (DB) pensions, external.
Ensuring the correct level of tax relief is applied to higher-rate taxpayers with these pensions would be highly complex.
It may mean they are automatically given 40% or 45% tax relief, then later handed a tax bill – possibly for thousands of pounds – to pay some of that back.
Tom Selby, from investment platform AJ Bell, says this would likely provoke “a blistering row” with NHS staff, teachers and civil servants who could fall into this bracket.
Given that ministers have said they will not raise taxes for working people, that would become a tricky policy to sell – and reports suggest changes have now been ruled out by the Treasury.
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