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speculation about Rachel Reeves‘The momentum continues for the upcoming Budget as she prepares to outline measures to address the deficit in public funds on Wednesday.
chancellor On Wednesday he told the public he had no “easy options” after the Institute for Fiscal Studies (IFS) estimated he needed at least £22 billion to plug the gap in the public finances.
The fiscal event has led to Rumors abound about what could happenIncluding the expected – and then apparent U-turn – increase in income tax,
It looked like Ms. Reeves would break down Labor’s election winning manifesto And increase income tax. It later abandoned that plan, following more optimistic forecasts received by the Treasury from the budget watchdog.
Some solutions we already know who will be included in Wednesday’s announcementRail fares will be frozen in the Budget, saving passengers on expensive routes more than £300 a year, and the cost of NHS prescriptions in England will also be frozen at £9,90,
Ms Reeves is expected to reaffirm Labour’s commitment to a triple lock on the state pension and confirm that the £13m pensioners It is sure to benefit from a rise in inflation next April.
Here, we’ll look at how other measures in the Budget could affect pensioners.
Stabilizing Income Tax Range
sir keir starmer Refuse Refuse to freeze income tax threshold in budgetWhich may result in people paying more tax “secretly”.
At Prime Minister’s Questions last Wednesday, Sir Keir refused to answer a number of questions from opposition leader Kemi Badenoch on the issue of the threshold freeze.
The tax-free personal allowance was capped at £12,570 until 2028 by the previous Conservative government. Fixed tax thresholds can be used to raise more money for the treasury, in effect secretly increasing taxes.
Even if income tax rates are not increased, the withholding may still result in people paying more taxes. Freezing the tax threshold could create what economists call “fiscal pressure” – more people are pulled into higher tax brackets as average earnings rise, but the threshold remains the same.
As previously mentioned, Ms Reeves is expected to confirm the Government’s commitment to a triple lock on the state pension in the Budget. But frozen tax caps could impact rising state pensions.
The state pension rises to £11,973 per annum from April 2025 and, as a result of the triple lock, is expected to rise to at least £12,578 per annum in April 2027.
The triple lock means the state pension increases annually, whichever is the highest rate of inflation, the average increase in earnings or 2.5%.
This would take it above the tax-free personal allowance frozen until 2027 and would mean tax would be paid on the state pension. If pensions continue to rise the amount paid by pensioners could increase in future years.
The Liberal Democrats have called on Ms Reeves not to use low inflation as justification for a “stealth tax”.
The party’s treasury spokeswoman Daisy Cooper said last week: “As the cost of living crisis looms, the Chancellor should not take this little gift horse in the mouth.
“Hitting the secret tax on people in next week’s Budget will prolong the pain of higher taxes and unfairly drag poor pensioners and low-income workers into paying tax for the first time.
“We Liberal Democrats are calling for emergency measures to reduce people’s energy bills, save our high streets with VAT cuts for hospitality and boost growth in every corner of the UK – funded appropriately by taxing the banks.
“The Chancellor must put homes and high streets first, and stop the most vulnerable people having to choose between heating and eating.”
mansion tax
The Chancellor is now expected to introduce a tax on homes Value of more than £2m in a move that could rise to between £400m and £450 million for the Treasury.
Some 2.4 million properties in the top three council tax bands – F, G and H – will be reassessed to determine which will be subject to the surcharge, which will cost an average of £4,500, The Times reports.
More than 150,000 properties in England and Wales would fall into the mansion tax bracket today, according to calculations by estate agent Knight Frank.
Knight Frank’s Tom Bill said the policy, which was first proposed by the Liberal Democrats in 2012, could accelerate downsizing and hit pensioners.
He said: “The arguments made in 2012 that some long-term home owners would be unable to pay tax remain valid. This will catch out pensioners whose house value has increased while their income has gone in the opposite direction.
“As a result, there could be further downsizing. This could result in more efficient use of the country’s housing stock, but this assumes that owners are ready or willing to leave a neighborhood where they may have lived for decades.”
personal savings allowance
According to The Telegraph, Ms Reeves is also expected to freeze personal savings allowance,
The allowance means basic rate taxpayers can earn up to £1,000 in savings interest every year without paying tax. This reduces to £500 for higher rate taxpayers but additional rate taxpayers get no allowance.
The Telegraph reports that older people will be most affected by this, according to savings comparison site Raisin UK. It says the average balance in savings for over-55s is £20,000 – more than any other age group.
In a similar way to freezing the tax threshold, freezing the personal savings allowance could cause people to “stealth” pay more tax. As savings have increased, tax-free allowances have not increased with them.
Regarding this, Kevin Mountford, founder of Raisin UK, said: “Pausing the Personal Savings Allowance for another year may seem like a small technical decision, but for pensioners, it is nothing.
“These are people who have worked hard, saved carefully, and done everything right. Now, as interest rates finally begin to reward savers, many are finding that their savings income is being taxed – not because they are rich, but because the threshold has not changed in years.
“Unlike working families, pensioners can’t take on extra hours or ask for a pay rise.”