‘Poorer’ pensioners to be dragged into Tory stealth tax, Lib Dems say

More than one million pensioners are set to be dragged into paying income tax by 2027-28 due to the Government’s stealth tax freeze, the Liberal Democrats have claimed.

According to new research commissioned by the party, when the stealth tax freeze expires in 2027-28, the tax threshold will have risen to £15,990.

The personal allowance threshold, the rate at which people start paying tax, has been frozen at its April 2021 level of £12,570.

As per analysis from the House of Commons Library, an estimated 1.2 million pensioners will be dragged into paying income tax in 2024-25.

By 2027-28, 1.6 million additional pensioners will be paying income tax compared to if the personal allowance had been increased in line with inflation.

The latest Department for Work and Pensions figures show that 12.7 million Britons now receive the state pension.

According to the Institute for Fiscal Studies, 8.5 million people over the age of 65 are now paying income tax, up from roughly 4.9 million in 2010.

Budget 2024
Chancellor of the Exchequer Jeremy Hunt (House of Commons/UK Parliament/PA)

Liberal Democrat Treasury spokesperson Sarah Olney said: “These stark figures reveal the stealth tax bombshell facing pensioners under this Conservative government.

“Older people who have worked hard and contributed all their lives are now being clobbered with years of unfair tax hikes.

“Jeremy Hunt’s pensioner-punishing Budget will not be forgotten come the next election. The Conservative Party faces a reckoning at the ballot from older voters sick of being taken for granted.”

Baroness Altmann, a former Tory pensions minister, told the Telegraph: “I do think it is worrying that so many more pensioners could be dragged into the tax net as the state pension may soon rise above the frozen threshold.

“Most of those tipped into tax will be poorer pensioners with little more than their state pension to live on. Most of them will be unaware of any liability and never have filled in a tax return in their life. They are then at risk of being hit with fines and penalties for not paying a tiny amount of tax they didn’t even know about.”

On Monday, it was revealed that HM Revenue & Customs is concerned that its customer service helpline will soon be overwhelmed by the millions of people across the UK being hit by stealth taxes.

A Treasury spokesman defended the decision on the freezing of tax thresholds.

They told the Telegraph: “After providing hundreds of billions of pounds to protect lives and livelihoods throughout the pandemic and Putin’s energy shock, we had to take some difficult decisions to help pay it back.

“Now the economy is turning a corner, we have cut National Insurance by a third, meaning that, coupled with above-inflation increases to personal tax thresholds since 2010, we have saved the average earner over £1,500 compared to what they otherwise would have paid.”

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