Millions of British pensioners may face a new "stealth tax" as their state pensions exceed the income tax threshold starting next April. The Daily Mail reports that due to the triple lock mechanism, the state pension will increase by at least 3.9% in April, reaching £13,000. This rise places most pensioners above the current tax threshold of £12,570, potentially making them liable for income tax. Chancellor John Healey faces pressure to address this issue during the upcoming Budget and is expected to announce measures to protect some pensioners from being taxed on their basic state pension income. However, details are sparse about how many will be protected or at what cost.
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Millions of older people face losing part of their state pension to Labour's stealth tax trap next year, despite Andy Burnham's pledge to protect them.
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Millions → see → them
Analysis suggests only one in 16 pensioners will be protected from a tax grab when the new state pension crosses the income tax threshold for the first time in April.
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pension → suggest → April
Official figures yesterday revealed that, due to the triple lock, the state pension is due to rise by at least 3.9 per cent next year, taking it to just over £13,000 – above the income tax threshold of £12,570.
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pension → reveal → 12,570
Ministers have said they will act to protect the poorest pensioners.
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they → say → pensioners
But Downing Street was unable to say how this would work yesterday – or how many people it would help.
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it → say → people
Details will be announced at next month's Budget, when Chancellor John Healey is under pressure to find big savings to reassure jittery financial markets that Labour can be trusted with the public finances.
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Labour → announce → finances
Former Bank of England economist Andy Haldane, who has advised Mr Burnham, warned the markets would continue to drive up the Government's borrowing costs unless ministers show they are serious about curbing spending.
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they → advise → spending
He told LBC: 'The markets now suspect that this is a traditional tax-and-spend socialist government with better TikTok videos.'
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this → tell → videos
Pictured: Chancellor of the Exchequer John Healey arrives in Downing Street ahead of a roundtable with business leaders on September 14
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Healey → picture → September
The Prime Minister's spokesman yesterday said the Government would bring forward plans 'to ensure anyone whose only income is the basic state pension will not pay income tax in this Parliament'.
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income → say → Parliament
But former pensions minister Sir Steve Webb said this could end up helping only one in 16 pensioners, leaving 94 per cent paying tax.
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this → say → tax
Older pensioners, who do not qualify for the new state pension introduced in 2016, could miss out on help completely.
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who → qualify → help
Sir Steve, now a partner at pensions consultancy Lane Clark & Peacock, said: 'Fixing this properly by raising the tax threshold for pensioners would cost more than £1billion.
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Fixing → say → 1billion
It looks like that is too much of a headache for the Chancellor so they are going to look to do something much more restricted – and much cheaper.'
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they → look → something
The new tax trap has been created by the ongoing freeze on tax thresholds, which has seen millions of people dragged into paying higher rates.
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millions → create → rates
The freeze was introduced by the last Conservative government to help pay for the £400billion cost of dealing with Covid.
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freeze → introduce → Covid
It was then extended by former Chancellor Rachel Reeves until 2031.
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It → extend → 2031
It has created the biggest stealth tax in history, which now looks set to drag in millions more pensioners.
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which → create → pensioners
At the last election, the Conservatives unveiled plans for a 'triple lock plus' policy, which would raise the tax threshold for pensioners.
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which → unveil → pensioners
During the Makerfield by-election in June, Mr Burnham suggested he was interested in introducing similar protection, saying: 'What I have heard on doorsteps is pensioners saying the freezing of the personal allowance has dragged more and more pensioners into tax.
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freezing → suggest → tax
So I do think you need to look at that issue as well.'
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you → think → issue
He said pensioners felt that what 'they have got through one way, they are saying now that it's being taken away in another'.
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it → say → another
But in office, the Prime Minister has reverted to a previous policy announced by Ms Reeves, which would help only those pensioners with no additional income.
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which → revert → income
Analysis by Lane Clark & Peacock found that fewer than a fifth of the 5.5 million people on the new state pension would be helped by the Government's plans.
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fifth → find → plans
However, it also found that none of the 7.7 million people on the old state pension would be helped.
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none → find → pension
Around 6.6million recipients top this up with additional state pensions and private provision.
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recipients → top → pensions
But they risk missing out on Government assistance because they are not solely reliant on the basic state pension, even if their total income is lower than the new state pension.
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income → risk → pension
The Aporia
