Tories Promise Triple Lock Plus Personal Allowance for Pensioners

It has long been a concern within the financial services industry that very soon the increases to the State Pension via the triple lock of the higher of consumer prices inflation (CPI), wages inflation and 2.5% increases would soon overtake the Personal Tax Allowance threshold of £12,570 (currently frozen until 2027/28) would create an administrative nightmare for pensioners as well as HMRC.

State pensions are technically taxable but paid without deduction of taxes i.e., paid gross, meaning that if/when the State Pension exceeds £12,570 many pensioners with State Pension income only would end up paying some of their state pension back in taxes.  Politically not great and administratively, a nightmare.  Who wants to see headlines of ‘Struggling pensioner fined for no paying tax back on state pension income’?

The conservatives have countered this with a promise to increase the personal tax allowance for pensioners at the same triple lock rates of increase for state pensions meaning state pensions would never exceed the personal allowance.

Comment

As sensible move admittedly but equally a ‘vote chaser’.  We are sure this will sit well with pensioners but what about the working adults? 

The Labour Party continually talks about the highest tax burden in 70 years despite seemingly forgetting about the following:

• Costs of Brexit.
• £500bn cost of the pandemic.
• Increased cost of living grants for low-income households.
• Energy bill grants.
• Military Aid for Ukraine.

The above must all be paid for hence the freezing of many of our allowances and paying more in taxes.  Whichever way you look at this, taxpayers must pay for these extraordinary costs and whoever is in power will know this.  It is why we had sustained inflation for a few years (to devalue government debt) although it was higher than expected given the impact of Russia/Ukraine, energy/fuel price hikes and therefore inflation being higher than anticipated, combined with frozen allowances. 

The Treasury/HMRC no doubt had already suggested a personal allowance hike for pensioners to the current government and it will be the same Treasury/HMRC civil servants advising Labour if they are elected.

Are they not simply reopening the age related personal allowance known as 'Age Allowance' that ceased in 2016/17, that used to increase your personal allowance and reduce the amount of tax you pay if your were born before 6th April 1938?