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New analysis shows that up to 1.6 million pensioners are expected to fall into the income tax net within four years due to stealth raids by the Conservative government, marking a significant surge in taxpaying elders.
The freeze on the income tax threshold, which determines the point at which individuals start paying income tax, is set to ensnare an additional 1.6 million pensioners by 2028, according to data from the House of Commons Library. This freeze has prevented the threshold from rising in line with inflation since 2021, resulting in a higher number of pensioners falling into the tax bracket.
Presently, 8.5 million pensioners are subject to income tax, but projections suggest that this figure could rise to 9.35 million by 2028, setting a new record high. This trajectory reflects a sharp increase from 2010 when only 4.9 million pensioners paid income tax.
The revelation has prompted criticism from the Liberal Democrats, who commissioned the research. Sarah Olney, the party’s Treasury spokeswoman, condemned the Conservative government’s taxation policies, labeling them a “stealth tax bombshell” for pensioners. She emphasized the adverse impact on older citizens who have diligently contributed to society throughout their lives.
The freeze on the income tax threshold, initially set at £12,570 by Rishi Sunak in 2021, has been extended until the end of 2028 by Jeremy Hunt. This stagnation means that more pensioners will be subject to income tax as their pension incomes rise with inflation—a phenomenon known as fiscal drag. Without the freeze, the threshold would have seen a substantial increase to £15,990 by 2027-28.
The Institute for Fiscal Studies (IFS) predicts that over 60% of over-65s will pay income tax by 2028, compared to around 50% in 2010. These projections underscore the growing financial burden on elderly taxpayers, particularly those reliant on state pensions.
Critics, including Baroness Altmann, a former Tory pensions minister, have voiced concerns over the potential impact on vulnerable pensioners, many of whom may be unaware of their tax liabilities. They warn of the punitive consequences for those inadvertently caught in the tax net, emphasizing the need for greater awareness and support.
As pensioners face mounting financial pressures, exacerbated by the pandemic and rising living costs, calls for government intervention to alleviate tax burdens are growing louder. The Treasury, however, defends its decision, citing the need to restore fiscal stability following unprecedented expenditure during the pandemic and global economic challenges.
