Stealth taxes to drag 1.6 million pensioners into paying income tax – Carmichael responds

Orkney and Shetland MP, Alistair Carmichael, has today responded to analysis which shows that 1.6 million pensioners are set to be dragged into paying income tax due to the government’s stealth tax freeze by 2027/28. Previous analysis by the Liberal Democrats found that 6,681 income tax-paying pensioners in the Northern Isles are expected to be hit by tax threshold changes.

House of Commons Library analysis looks at the impact of the Chancellor’s decision to freeze the personal allowance at £12,570, the rate at which people start paying tax. Without the stealth tax freeze, the allowance would have risen to £15,220 in the coming financial year (2024/25) and up to £15,990 in 2027/28.

The analysis estimated that around 1.2 million pensioners will be dragged into paying income tax in 2024/25. By 2027/28, 1.6 million additional pensioners will be paying income tax compared to if the Personal Allowance had been increased in line with inflation.

The latest DWP figures show there are 12.7 million people receiving the state pension. According to the Institute for Fiscal Studies, well over 60 per cent of these pensioners now pay income tax, up from around 50% in 2010. The research found 8.5 million people over the age of 65 were now paying tax on their income, up from roughly 4.9 million in 2010.

Separate analysis from the Resolution Foundation has found that the freezing of income tax thresholds will leave the average taxpaying pensioner £1,000 worse off by 2027-28, or a collective hit of £8 billion.

Mr Carmichael said:

“These stark figures reveal the stealth tax bombshell facing pensioners under this Conservative government. You get the impression that the Tories are going round every age group in the country and looking for the best way to infuriate them. If that is their goal then they are doing a fine job of it.

“Older people who have worked hard and contributed all their lives are now being clobbered with years of tax hikes. Many elderly people in the isles are already struggling to make ends meet as heating bills and the cost of the weekly shop remain high – this just adds to that challenge.

“Jeremy Hunt’s pensioner-punishing Budget will not be forgotten come the next election. The Conservative Party faces a reckoning at the ballot box from older voters who are sick of being taken for granted.”