Spring Budget 2023 pension tax changes incorporated into relief forecasts

HM Revenue & Customs has incorporated the pension tax changes announced at Spring Budget 2023 into its cost forecasts for tax reliefs, according to its non-structural tax relief statistics published on 5 December 2024¹. The department said the forecasts for 2023 to 2024 and 2024 to 2025 "incorporate the effects of policy changes, including the abolition of the Lifetime allowance and the increase to the Annual allowance announced at Spring Budget 2023"¹.

The Budget, delivered by the chancellor Jeremy Hunt in the House of Commons, raised the tax-free yearly allowance for pension contributions from £40,000 to £60,000, having been frozen for nine years, and set out the abolition of the amount workers can accumulate in pensions savings before paying additional tax². The annual allowance and the lifetime allowance are the two limits affected.

The statistics cover non-structural reliefs, which HMRC describes as reliefs designed to advance economic or social objectives¹. In the 2023 to 2024 tax year, estimates are available for 107 reliefs, representing tax relief worth £207 billion, up £3 billion (1%) from £204 billion in 2022 to 2023¹. Income Tax relief for registered pension schemes was the second largest single relief at £28.5 billion, up £5.8 billion relative to five years earlier, while NICs relief on contributions to, and benefits from, registered pension schemes was £23.5 billion, up £2.1 billion over the same period¹.

By tax head, VAT had the highest cost of relief in 2023 to 2024 at £69 billion, followed by Capital Taxes and Income Tax at £43 billion each, with Corporation Tax at £21 billion and NICs at £28 billion¹. HMRC said the figures are estimates of relief claimed and granted, do not represent the gain to the Exchequer if a relief were abolished, and do not model behavioural responses¹.

Why it matters for households

The figures confirm the fiscal scale of pension tax relief after the Budget changes, rather than altering what savers can pay in. The £60,000 annual allowance and the removal of the lifetime allowance cap were announced in March 2023², and HMRC's December 2024 publication treats them as settled policy in its costings¹. The £28.5 billion Income Tax figure for 2023 to 2024 is the cost of relief on registered pension schemes, which includes relief given through relief at source or net pay arrangements¹.

The statistics also show how much of the total relief cost sits with a small number of reliefs: the largest five account for around 60% of all costed non-structural reliefs, and half of the costed reliefs cost less than £10 million¹. For pension savers, the practical effect of the Budget measures depends on individual circumstances, including whether the tapered annual allowance or the money purchase annual allowance applies, and whether unused allowance from earlier years can be used through carry forward. HMRC has not reported any change to those rules in this publication¹.

What happens next

HMRC said most announcements in the Autumn Budget 2024 take effect from April 2025 or later and so did not affect this year's estimates, though Capital Gains Tax estimates were adjusted for the main rate change effective from 30 October 2024¹. The publication states that the latest year for which there are estimates is 2024 to 2025, largely based on forecasts¹. No further dated steps on pension relief costings are set out in the documents.