People on full New State Pension could pay tax by 2028 due to current freeze on personal allowance
19.09.2023 - 13:07
Some 12.6 million older people could be set for a bumper State Pension pay rise next April under the Triple Lock policy, however, while an increase of 8.5 per cent would undoubtedly help more older people combat the cost of living crisis, it will also push an estimated half a million retirees nearer the personal tax allowance annual limit of £12,570.
An uprating of 8.5 per cent would see those on the full New State Pension receive £11,502 in annual payments from the Department for Work and Pensions (DWP) - 13 payments made every four weeks - leaving them just £1,068 before they reach the personal tax allowance threshold. Some 9.6 million people on the maximum Basic State Pension would receive £8,814 over the 2024/25 financial year under the Triple Lock uprating.
Jason Hollands, Managing Director at wealth management firm Evelyn Partners, warns of a “policy showdown on the horizon between the Triple Lock and Chancellor Jeremy Hunt's multi-year freeze on personal tax allowances”.
He explained: “Both Conservatives and Labour have pledged a commitment to the Triple Lock in their manifestos for the upcoming general election. And the policy of the current Government is to keep the personal allowance frozen until at least April 2028 at £12,570, with no indication of an alternative policy from Labour.
“In the subsequent three years it will require Triple Lock increases of just a sliver greater than 3.0 per cent to take the annual State Pension above the annual personal tax allowance”.
He continued: “That then presents a conundrum to the government of the time: create an administrative and political headache by taxing the State Pension, possibly at source - which would be massively unpopular among the more than 13 million
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