The average pensioner will be forced to pay an extra £3,000 in tax by 2028 thanks to a stealth raid on incomes from the Labour Party government Chancellor Rachel Reeves, analysis shows.
A stealth tax raid will cost the average pensioner £3,000. The average pensioner will be forced to pay an extra £3,000 in tax by 2028 thanks to a stealth raid on incomes from the Labour Party government Chancellor Rachel Reeves, analysis shows.
The personal allowance – the amount you can earn before paying income tax – has been frozen at £12,570 since April 2021. The personal allowance would have been on track to hit £16,290 in the 2027-28 tax year if it had risen with inflation.
It means a pensioner on a typical income of around £30,000 a year will pay £19,998 of tax over the six-year freeze, compared to just £17,038 if the threshold had risen with inflation – a difference of £2,960.
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Christine Thornley, a partner in the lifestyle and estate-planning team at Irwin Mitchell Thornley says: “The over-50s are particularly affected by stealth taxes. Many in this age group are coming into inheritances. Additionally, those over 50 who are still working often earn more, making it difficult to avoid the impact of stealth taxes on their income.”
Jon Greer, of Quilter, said: “Pensioners are being quietly dragged into the tax net thanks to years of frozen thresholds and rising income. What might once have been seen as a modest retirement income is now being taxed more heavily each year, all without a single change to the tax bands.
“The result is a stealth raid that many pensioners simply won’t have planned for. While it might not feel like a tax rise, for those living on fixed incomes, the financial pressure is very real.”
An HM Treasury spokesman said: “We are committed to help our pensioners live their lives with dignity and respect, which is why we have frozen fuel duty and increased the state pension to leave pensioner couples up to £88 better off a month.
“Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament.” Griffin adds: “It is looking increasingly likely that we could soon be in the perverse situation where the State Pension surpasses the personal allowance, and pensioners might have to start paying back some of their State Pension to HMRC because of the frozen threshold.”
“This fiscal drag effect has been particularly evident in recent years as income tax thresholds have not kept pace with inflation or wage growth,” says Griffin.
