Home Finance Income tax warning for pensioners as more than 850,000 face new change

Income tax warning for pensioners as more than 850,000 face new change

Another 850,000 pensioners will be dragged into paying income tax over the coming years, new research has shown.

Figures from the House of Commons predict an extra 850,000 pensioners will be paying the levy in 2028 than this year, with the total number increasing to 9.35 million.

The research, commissioned by the Liberal Democrats, found an extra 1.6 million will pay the tax than would have done if the threshold had gone up in line with inflation since 2021.

As reported in The Telegraph, Lib Dem Treasury spokeswoman Sarah Olney said: “Jeremy Hunt’s pensioner-punishing Budget will not be forgotten come the next election.

“The Conservative Party faces a reckoning from older voters sick of being taken for granted.”

There were no changes to income tax thresholds announced in the Spring Budget. National Insurance was cut by 2p, but people of state pension age do not pay this tax.

The Government has committed to the triple lock, with payments increasing 8.5 percent from this month, but this will also push more pensioners closer to being subject to income tax.

With the 8.5 percent increase, the full new state pension is increasing from £203.85 a week to £221.20 a week, an increase to £11,502.40 a year.

This is only £1,000 away from being subject to income tax, with the threshold frozen at £12,570 a year.

If the income tax threshold had increased in line with inflation, the allowance would have gone up to £15,220 for the 2024-25 tax year and would be at £15,990 for 2027-28.

A petition was recently launched calling for a £15,000 income tax allowance for pensioners, which at the time of writing has had almost 9,500 signatures.

The petition on the Parliament website states: “We think the Government should put up the personal tax allowance to £15,000.

“This could help people on a low wage and help with the increase in the cost of living.

The Government has frozen our personal tax allowance, and due to inflation we feel that we are watching more of our hard-earned cash vanish.”

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