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Pensioners face ‘£8 billion hit’ as a result of Spring Budget tax changes

A freeze on tax thresholds means pensioners and high earners are the “biggest losers” after the new Tory Budget.

Analysis from The Resolution Foundation found that pensioners “face a collective £8billion hit” as the government prioritises “poorer, younger households”.

The Foundation found that the six-year freeze on income tax thresholds will result in an average loss of £770 for those aged 66 and over, compared to a gain of £590 on average for households headed by someone aged 18-45.

Income tax thresholds have been frozen since 2021 but inflation rates have led pensioners into higher tax brackets, meaning that tax paying pensioners will be losing an average £1,000 by 2027-28.

Pensioners received no tax relief from the 2p cut to National Insurance as they are exempt from paying it.

Torsten Bell, chief executive of the Resolution Foundation, told the Telegraph: “A pre-election Budget produced another round of pre-election tax cuts. Who could have seen that coming?

“It has been a frenetic few years for tax policy making, with huge rises and cuts announced in quick succession. Middle earners have come out on top, while taxpayers earning below £26,000 or over £60,000 will lose out. The biggest group of losers are pensioners, who face an £8billion collective hit.

Mr Bell said that the Government has “reversed course” from the policies that “dominated during the 2010s” as it has turned its back on “those aged over 65 and on the highest incomes”.

Mr Bell continued: “While tax and benefit strategies have been reversed, spending priorities have been rehashed. The £19billion of cuts to unprotected public services after the next election are three-quarters the size of those delivered in the early 2010s. The idea that such cuts can be delivered in the face of already faltering public services is a fiscal fiction.

“Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.”

Paul Johnson, director of the Institute for Fiscal Studies, told the paper: “Income tax changes will leave most of the £650 a year worse off by 2027 and £3,000 a year worse off if they’re higher rate taxpayers. The Chancellor really has focused the money he’s got on people of working age rather than on pensioners.

“Government and opposition are joining in a conspiracy of silence in not acknowledging the scale of the choices and trade-offs that will face us after the election. They, and we, could be in for a rude awakening when those choices become unavoidable.”


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