Yahoo Finance Pensioners who pay income tax to lose £1,000 each after Jeremy Hunt’s budget
All eight million taxpaying pensioners will see their taxes increase as income tax thresholds remain frozen, an £8n collective hit from the spring budget.
The Resolution Foundation described pensioners as the biggest losers from the budget, amid falling living standards and stagnating growth.
Torsten Bell, its chief executive, said: “The likely last budget before the general election showed that this has been a parliament of flatlining growth, falling living standards, and notable redistribution from the old and the rich to the young and the poor.”
The thinktank said this is the first parliament in modern history set to see a fall in living standards with real household disposable income to fall by 0.9%.
“The biggest choice Jeremy Hunt made was to cut taxes for younger workers, while allowing taxes to rise for eight million pensioners. This is a staggering reversal of the approach taken by Conservative governments since 2010,” Bell added.
Read more: What a 2p national insurance cut means for your finances
Anyone earning above £12,570 per year has to pay national insurance. This threshold has been frozen for years and is only set to rise in 2028-29.
This freeze is also called fiscal drag or a stealth tax. As prices rise, workers and pensioners need more money just to keep their living standards. But as the tax threshold is frozen, more of their income is dragged into taxation – a bigger parcel is taken by HMRC, even as UK households struggle with higher prices.
The proportion of over-65s who have to pay income tax has risen from 50% in 2010/11 to 68% last year, according to analysis from the Institute for Fiscal Studies, another think tank.
In its analysis of the spring budget, the Resolution Foundation said the Conservative party is choosing not prioritise
“Looking beyond just employees, though, personal taxes are still going up significantly, with threshold freezes exceeding value of NI rate cuts by £20bn (£41bn versus £21bn). What’s going on? £8bn is being raised by the freezes to thresholds for employer NI, which in time should feed through into lower pay levels for employees. And there is a big group of losers: pensioners, who are already exempt from NI but affected by freezes to income tax thresholds.”
Read more: What the budget means for your pension
“All eight million taxpaying pensioners will see their taxes increase, by an average of £1,000 – an £8bn collective hit. This approach is justified with tax cuts focused on working-age employees and the self-employed, who currently pay higher rates of tax than pensioners or landlords, but it is a staggering turnaround from the approach of Conservative governments since 2010, who have generally focused support on pensioners,” the report said.
But Jeremy Hunt rejected this claim. He told Sky News: We’ve done an enormous amount for pensioners. This government introduced the triple lock … we have really prioritised pensioners.
Watch: Jeremy Hunt forced to defend Budget impact on low-income earners
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