Pensioners could be slapped with a £15,000 stealth tax raid to pay for a comfortable retirement, as fiscal drag continues to impact them under the Labour Party government.
State pensioners told they have to find extra £15,000 thanks to HMRC tax raid
State pensioners face having to find an extra £15,000 thanks to a HMRC tax raid, it has been warned. Pensioners could be slapped with a £15,000 stealth tax raid to pay for a comfortable retirement, as fiscal drag continues to impact them under the Labour Party government.
Pensioners could face a £14,960 increase in the amount needed for a comfortable retirement by 2030 if Labour extends the current income tax threshold freeze beyond 2028.
According to trade body Pensions UK, a single pensioner currently requires £43,900 in disposable income to maintain a comfortable retirement But if disposable income requirements continue rising at six per cent annually and tax thresholds remain frozen, pensioners would need £58,860 by 2030.
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It means state pensioners would require a gross income of £77,153. Conservative Party peer Baroness Altmann, a former pensions minister, warned: “Taxing these pensioners for perhaps a few pennies will be an administrative nightmare and cause distress and upset.”
Alan Barral, financial planner at Quilter Cheviot, said: “Frozen income tax thresholds may feel like a technical detail, but they have real consequences for retirees whose standard of living is being squeezed.”
A Government spokesman responded: “We are committed to helping our pensioners live their lives with dignity and respect, which is why in April the basic and new state pension increased by 4.1 per cent.”
“Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament,” the Government stated.
“Fiscal drag” is when tax thresholds do not increase with the rising cost of living. This in turn has the effect of pulling more people into higher tax brackets.
In 2023, the Institute for Fiscal Studies estimated that for every £1 households gain from high-profile cuts to rates of income tax and national insurance, they will lose £2 from freezes to other thresholds and stealthy policy options.
“These freezes – which represent a stealthy and arbitrary way to raise tax revenue – often have a bigger impact on household incomes than more eye-catching discretionary measures,” the IFS said.