Stealth tax freeze threatens incomes of 1.6 million pensioners

Nearly two million pensioners will be forced to pay income tax over the next four years as the government secretly freezes taxes, new research shows.

The chancellor has refused to raise the £12,570 threshold when people start paying income tax and extend it until 2028, which will result in record numbers of pensioners.

Currently, 8.5 million pensioners pay income tax – up from around 4.9 million in 2010.

But analysis by the Lib Dem House of Commons Library found that an extra 1.6 million pensioners would pay into their pensions over the next four years, compared with a scenario where the threshold rose with prices.

Without the freeze, the allowance would have risen to £15,220 this year and £15,990 in the 2027/28 tax year.

The Lib Dems said the policy would leave the Conservatives facing a “counting of votes from older voters who are tired of being taken for granted”.

Latest figures from the Department for Work and Pensions show there are 12.7 million people receiving the state pension. More than 60% of pensioners now pay income tax, up from around 50% in 2010, according to the Institute for Fiscal Studies.

Further analysis by the Resolution Foundation thinktank found that freezing income tax thresholds would reduce the average income of tax-paying pensioners by £1,000 in 2027-28.

Lib Dem treasury spokesperson Sarah Olney MP said the figures were the result of Jeremy Hunt’s “pensioner-punitive budget”: “These stark figures reveal a lot about pensions under the Conservative government. A hidden tax bombshell for recipients.

“Seniors who have worked hard and dedicated their lives are now being hit hard by years of unfair tax increases.

“Jeremy Hunt’s budget to punish pensioners will not be forgotten at the next election.”

The news follows the spring budget, which saw the government prioritize tax cuts for workers.

After cutting National Insurance by a further 2 percentage points, Mr Hunt and Rishi Sunak said they aimed to scrap the tax entirely, leading campaigners to fear the cost of scrapping it would fall on pensioners on the shoulders of the person.

Whether it is the Conservative Party or labor There is now a commitment to keep the state pension triple lock, which means the state pension will rise every year based on wage increases, inflation or a maximum of 2.5%. This means the state pension will rise by 8.5% this month.

Former Conservative pensions minister Baroness Altmann told the BBC daily telegraph Income tax freeze ‘worrying’: “I do think it is worrying that with the state pension potentially exceeding the freeze threshold very soon, more pensioners could be dragged into the tax net.

She added: “The majority of taxpayers are poorer pensioners who live solely on their state pension. Most of them are completely unaware of any responsibilities and will never fill in a tax bill in their lifetime return. They then risk fines and penalties for not paying a small amount of tax that they didn’t even know about.”

A Treasury spokesman defended the decision to freeze tax thresholds as a “difficult decision” the government had to make, saying: “Hundreds of billions of pounds have been provided to protect lives and businesses throughout the pandemic and Putin’s energy shock. After making ends meet, we had to make some tough decisions to help pay off our debt.

“The economy is now turning a corner and we have already cut National Insurance by a third, which means, combined with the above-inflation rise in personal income tax thresholds since 2010, we have saved the average earner over £1,500 .paid.”