YOU may have breathed a sigh of relief this week after the Office for National Statistics announced that inflation had remained steady between September and October.

Don’t get too excited though: with the figure remaining at a five-and-a-half-year high of three per cent while wage growth is at just over two per cent we are all continuing to get that little bit poorer.

Add in the fact that the public purse is looking in desperate need of a boost and you may want to pay close attention to what Chancellor Philip Hammond unveils in his Budget on Wednesday.

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Though changes to income tax bands are now the responsibility of the Scottish Government, which will reveal its own Budget on December 14, it will still be possible for Mr Hammond to call on us all to contribute more to Government funds.

An obvious avenue open to the Chancellor would be to cut tax reliefs on savings vehicles such as pensions and ISAs, which would impact anyone saving into them by effectively reducing the amount they would be able to put away.

Alternatively, Mr Hammond could seek to boost Government coffers by increasing the amount of tax levied on items such as insurance premiums, which would hit us all by further adding to household spending.

When it comes to pensions, the money you save into a workplace scheme each month is topped up by the Government by way of tax relief that essentially allows you to lock away a portion of your salary before any income tax has been paid on it.

Although you will pay tax on your pension when you start receiving the cash from it in later life, pensioners are currently allowed to withdraw a 25 per cent tax-free lump sum and also stand to benefit from being on a lower income-tax band by the time they retire.

According to NFU Mutual the Chancellor may be considering clawing back some of the benefits awarded to pensioners by capping the amount that can be taken as a lump sum at £100,000.

As this would affect anyone with a pension pot of £400,000, NFU Mutual chartered financial planner Sean McCann said savers would have to make sure they know how much they have in their pension so they do not fall foul of any change in the rules.

“Capping the amount of tax free cash that can be taken from pensions would claw back some much needed tax for the Treasury,” Mr McCann said.

“Setting it at £100,000 would mean those with pension savings greater than £400,000 would be affected. For many people, their pensions will be worth more than their home. While most people know the value of their home, few have an idea of the true value of their pension.”

Mr Hammond may also choose to alter pension tax relief, especially as he decided not to touch it last year. As tax relief favours the wealthy by allowing a basic-rate taxpayer to save £100 from a contribution of £80 but a higher-rate taxpayer to save £100 from a £60 contribution, such a move could prove popular with younger and less well-off savers.

An alternative to relying on income tax bands, according to Jason Hollands, managing director of wealth management group Tilney, could be to introduce a single flat rate of relief instead. If that rate was set at a level in between 20 per cent and 40 per cent it would boost the amount of relief given to anyone on lower rates of tax while simultaneously giving less to higher-rate taxpayers.

“Sweeping away higher and additional rate relief on pension contributions altogether and moving to a flat rate of relief at, say, 30 per cent is the radical option,” Mr Hollands said.

“It is also one which could be positioned as ‘fairness’ and at the same time actually make pensions more attractive for most people who currently receive relief at the basic rate.”

When it comes to indirect taxes, there are fears among insurers that Mr Hammond may seek to boost the overall tax take by further increasing the amount that is levied on insurance payments.

Paid on the premiums charged for everything from pet and motor insurance to buildings, contents and private medical cover, insurance premium tax has already risen sharply in recent years, increasing from six per cent in 2015 to 12 per cent this year.

According to industry body the ABI, the Government raises the equivalent of £179 per UK household via the tax, with ABI director of general insurance policy James Dalton stressing that it “impacts hardest on the poorest”.

“Insurance paying customers in Scotland need a break, not a further rise in insurance premium tax,” Mr Dalton said.

“It’s time for the Chancellor to end this raid on the responsible and commit to no further increases this Parliament.”