Calls to scrap tax on State Pension continue to soar ahead of annual payment uprating next month
22.03.2024 - 09:29
/ dailyrecord.co.uk
More than 39,500 people have signed an online petition calling for income tax on the State Pension to be scrapped in order to help “reduce the tax burden on pensioners” despite the UK Government rejecting the proposal earlier this year. The petition was created after it was announced in November the Personal Allowance income threshold will remain frozen at £12,570 during the 2024/25 financial year.
The Personal Allowance has been frozen at £12,570 since the 2021/22 financial year and sets an initial level of earnings on which people don’t pay income tax. However, the 8.5 per cent uprating on the New and Basic State Pension next month is expected to drag an estimated 900,000 people in retirement into the tax net - if the Personal Allowance remains unchanged this year.
In its written response to the petition in January, the Treasury said “the Personal Allowance (PA) is set at a level high enough to ensure that pensioners whose sole income is the New or Basic State Pension do not pay income tax” adding the UK Government has “nearly doubled the income tax Personal Allowance since 2010 (30% higher in real terms), ensuring some of the lowest earners do not pay income tax”.
The response continued: “If the PA had been uprated by inflation every year since 2010-11, it would be £9,655 in 2023-24, which is £2,915 lower than its current level of £12,570. Due to the PA, around 30 percent of individuals do not pay tax.
“Removing income tax from the State Pension would add complexity to the tax system and those paying higher rates of tax would receive the greatest benefit. Lower-earning individuals with income below the higher rate threshold would benefit less and those earning below the PA would not benefit at all.”
The Treasury
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