Pensioners risk being pushed deeper into hardship if the taxman raids their income. (Image: Getty)
Pensioners risk being pushed deeper into hardship if the taxman raids their income, campaigners have warned.
More than seven out of 10 people support increasing the point at which pensioners start paying tax from ￡12,570 to ￡15,000.
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The Treasury’s continued freeze of the personal allowance is expected to result in an extra 650,000 pensioners having to pay tax. The Institute for Fiscal Studies has warned that most tax-paying pensioners will be “￡650 a year worse off by 2027”.
Caroline Abrahams of Age UK said it was “high time the Government started increasing personal allowances again”.
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Exclusive polling by WeThink shows 71 per cent of people want the personal allowance raised to ￡15,000 for pensioners with just 14 per cent opposed. This was backed by half of 18-24s and nine out of 10 65-74s.
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Last month’s 8.5 per cent increase in the maximum state pension to ￡11,502 means many older people will be pushed over the income tax threshold if they have any extra income. It is feared that gains from the triple lock – which ensures the state pension rises by at least 2.5 per cent a year and keeps pace with wage increases and inflation – will be clawed away as a result of the frozen threshold.
Dennis Reed of Silver Voices, which campaigns on behalf of pensioners, said that “unfreezing the personal allowance is a major priority”. He warned that the “triple lock increase has lifted many thousands of older people into paying tax for the first time” and “much of the benefit has been lost”.
Morgan Vine of Independent Age is concerned about the plight of the “staggering one in five single pensioners have no other income outside of the state pension and benefits” if thresholds stay frozen and they are forced to pay tax. He cautioned that they are “already struggling to make ends meet and taxing their low income could risk pushing them further into poverty”.
Mr Vine said the charity has “seen an increase in callers that are anxious about the prospect of having to pay tax in the near future”.
“Callers have shared they are washing in cold water to save energy, reducing the amount of food they eat, and avoiding meeting up with loved ones as they cannot afford a coffee,” he said. “There are currently around two million older people living in poverty, and a further one million precariously living on the edge.”
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A petition calling for state pensions income to be made tax-free has received nearly 53,800 signatures. The Government says the personal allowance is “set at a level high enough to ensure that pensioners whose sole income is the new or basic state pension do not pay income tax”.
Labour MP Sir Mark Hendrick asked if the Chancellor would make an assessment of the potential merits of raising the personal allowance for pensioners to ￡15,000.
Treasury minister Nigel Huddleston said: “As with all aspects of the tax system, the Government keeps the personal allowance under review and any decisions on future changes will be taken by the Chancellor in the context of the wider public finances.”
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