Millions of Britain's poorest pensioners to be hit by ‘stealth tax' as Government tries to plug hole in public finances
Media reports suggest everyone on the full state pension could be forced to pay income tax as early as next year, even if they have no other income.
1
It means millions of people who have no other way to fund their retirement will start paying tax for the first time.
This is because the personal allowance - the amount of income you can have before you start to pay tax - is stuck at £12,570 at least until 2028.
Meanwhile the state pension, which is currently at £11,973 a year, is on track to go over that limit due to the triple lock system.
Under the triple lock, the state pension increases by whichever is highest out of the rate of inflation, annual earnings growth or 2.5%.
If average earnings continue to grow at their current rate of 5.2%, next year's state pension will rise above the income tax threshold for the first time.
Therefore pensioners relying entirely on the state pension will need to pay the basic tax rate of 20% on any amount above the personal allowance limit.
The exact figure they will need to pay will be confirmed later this year.
The Mail on Sunday is reporting Chancellor Rachel Reeves is considering an extension of the freeze on the personal allowance rate.
The Government is trying to plug an estimated £30billion gap in public finances - something that has become more difficult after it faced a bruising defeat this week in the Commons over its welfare reforms.
Reeves had been trying to push through a bill that would see rules tighten on eligibility for Personal Independence Payments (PIP) and also freeze the level of payments for some Universal Credit claimants.
Could you be eligible for Pension Credit?
The controversial reforms were aimed at raising billions of pounds and encouraging more people to get back into work.
But the bill was watered down after a rebellion by Labour MPs, which has left the Chancellor scrambling to find new ways to save.
The Institute for Fiscal Studies (IFS) think tank estimates Reeves could raise up to £10billion a year by 2030 if she freezes the personal allowance bands for the next two years.
The Chancellor has few options left without breaking Labour 's manifesto commitments, which include no increase in income tax, employee National Insurance contributions, VAT or corporation tax.
It's worth noting that personal allowances were frozen by the previous Government for six years until 2028.
Shadow Chancellor Sir Mel Stride The Mail on Sunday: "At the election last year the Conservatives promised to protect the state pension from being dragged into tax – Labour chose not to match that commitment.
"They claim to be protecting pensioners through the triple lock, but this stealth tax will erode its value."
How does the state pension work?
AT the moment the current state pension is paid to both men and women from age 66 - but it's due to rise to 67 by 2028 and 68 by 2046.
The state pension is a recurring payment from the government most Brits start getting when they reach State Pension age.
But not everyone gets the same amount, and you are awarded depending on your National Insurance record.
For most pensioners, it forms only part of their retirement income, as they could have other pots from a workplace pension, earning and savings.
The new state pension is based on people's National Insurance records.
Workers must have 35 qualifying years of National Insurance to get the maximum amount of the new state pension.
You earn National Insurance qualifying years through work, or by getting credits, for instance when you are looking after children and claiming child benefit.
If you have gaps, you can top up your record by paying in voluntary National Insurance contributions.
To get the old, full basic state pension, you will need 30 years of contributions or credits.
You will need at least 10 years on your NI record to get any state pension.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Mail
8 minutes ago
- Daily Mail
Amazon offers 15-minute food and drink deliveries via GoPuff deal - has it launched in your area?
Amazon now offers 15-minute grocery deliveries in areas across Britain as part of a new partnership with US firm GoPuff. The US tech giant said shoppers can order thousands of grocery products, including fresh food and alcohol, for delivery from local 'micro-fulfilment centres'. Orders are available for arrival in under an hour and as fast as 15 minutes, available all day, every day, according to Amazon. Pennsylvania-based GoPuff was one of many ultra-fast grocery delivery companies that expanded quickly during the pandemic when lockdowns heightened consumer demand. Turkey-based rival Getir pulled out of the UK, Europe and the US last year after its finances came under pressure and it kickstarted a cost-cutting drive. Amazon's new UK offering follows an initial launch in May, with services rolled out to residents in Birmingham and Salford. The service is now available in Birmingham, Bristol, Cambridge, Cardiff, Chessington, Coventry, Derby, Leeds, Liverpool, London, Manchester, Newcastle, Nottingham, Salford, Sheffield and Swansea. It joins grocery retailers Morrisons and Iceland, which are available to Amazon's UK customers. The online share of UK food sales skyrocketed during the pandemic, but has since stabilised. Around 9 per cent of all food retail sales were made online as of December 2024, compared to a 2021 peak of 12 per cent, according to Statistica. Russell Jones, Amazon's director of grocery partnerships, said: 'We are always working to give customers more choice and more convenient options to have their groceries delivered. 'The new launch with GoPuff brings our customers access to a convenient and affordable way to access their everyday groceries.'
The Independent
12 minutes ago
- The Independent
Ministers fail to rule out cutting Send school plans after campaigners' concerns
Ministers have failed to rule out slashing education plans for children and young people with special educational needs, after campaigners warned against the move. Education minister Stephen Morgan insisted parents should have 'absolutely' no fear that support for children with special needs or disabilities (Send) will be scaled back. But he could not guarantee that the current system of education, health and care plans (EHCPs), which are issued to give children specialist classroom support, would remain in place. In a letter shared with the Guardian newspaper, campaigners have said that without the documents in mainstream schools, 'many thousands of children risk being denied vital provision, or losing access to education altogether'. On Monday, Mr Morgan told broadcaster LBC the current system of support is 'failing children, it's failing parents'. Asked if concerned campaigners could have no fear that Send support will be scaled back, Mr Morgan replied: 'Absolutely. What we want to do is make sure we've got a better system in place as a result of the reform that we're doing that improves outcomes for children with additional needs.' But pressed whether the reforms could include scrapping ECHPs, Mr Morgan replied: 'We're looking at all things in the round. 'I'm not going to get into the mechanics today, but this is about strengthening support for system.' On Sunday, Education Secretary Bridget Phillipson would similarly not be drawn on whether the plans will be retained. 'What I can say very clearly is that we will strengthen and put in place better support for children,' she told the BBC. The Government plans to publish a white paper in the autumn detailing how it will reform support for Send, according to Mr Morgan. Requests for Send support have risen year-on-year. In total, there were 638,745 EHCPs in place in January 2025, up 10.8% on the same point last year. The number of new plans which started during 2024 also grew by 15.8% on the previous year, to 97,747. Requests for children to be assessed for EHCPs rose by 11.8% to 154,489 in 2024. In a letter to the Guardian, campaigners including the heads of charities, professors, Send parents including actor Sally Phillips, and campaigners including broadcaster Chris Packham warned against scrapping ECHPs as part of any overhaul of support. 'Whatever the Send system's problems, the answer is not to remove the rights of children and young people. Families cannot afford to lose these precious legal protections,' they said. MPs have warned ministers have not been clear about their plans, and could face a rebellion akin to last week's welfare Bill revolt, according to the Guardian. In a signal the Government is willing to square up to its rebellious backbenchers, Mr Morgan told ITV's Good Morning Britain that Labour MPs had 'stood on a platform a manifesto commitment to reform the Send system'. He also would not be drawn into suggestions by Good Morning Britain that the reforms were a cost-cutting measure being driven by the Treasury. 'Well, look at the figures. We've actually put more money into the Send system, the £1 billion for high needs announced last year,' he replied to the question. Amid mounting pressure from MPs to scrap the two-child benefit cap, the minister said 'nothing has changed' in the Government's plans, which will see a child poverty strategy report back in the autumn. Mr Morgan added: 'We're looking at all levers to bring down child poverty, but that's got to be fiscally done well, and obviously we need to grow our economy.'
The Sun
14 minutes ago
- The Sun
Mums race to Asda to bag ‘insane bargains' on kids' clothes scanning for £2 and ‘saving £50 on summer hols stuff
MUMS are rushing online after spotting a massive 'glitch' on the Asda George site and they're snapping up kids' clothes for as little as £2. Savvy shoppers have flooded social media to share their hauls, revealing they've saved a fortune on summer bits for their little ones just in time for the school holidays. 2 One excited mum took to Facebook to post about the hidden savings, writing: "Insane bargains at Asda George! "Had all these sleepsuits in my basket on sale at £6 each. Went to re-look at the sale and all but one had gone down to £3. "Listed low to high and everything shows in its original sale price so must be a glitch.' And other parents were all over it. One claimed they were already stocking up for their newborn, she said: 'Thank you, I got some bargains for my baby due in August.' Another raved: 'Saved over £50 for my son's holiday stuff, love it!' A third added: 'Placed an order and managed to get a few bits, thanks.' Another mum said she bagged a 5-pack of shorts for just £2, which she called 'perfect for little ones on summer holiday'. And the best part is the mega deals are available online but you'll have to be quick, as stock is flying out. Delivery fees vary depending on your chosen slot, with standard delivery starting from £2.95 and named day or next day options from £4.50. Kat Farmer's new George at Asda Collection The buzz comes just weeks after Asda launched its first-ever stand-alone George store in Leeds, which could be rolled out nationwide if it proves a hit. The new store, which opened on Saturday, May 10, in the old Asda Living unit at Crown Point Retail Park, is a dream come true for George fans. It's packed with affordable fashion, stylish homeware, must-have toys, and adorable baby gear, plus a brand new café to keep you fuelled mid-shop. There are currently 30 Asda Living stores in the UK, but the supermarket giant is testing the waters with this new George-only concept. Bosses are expected to make a decision later this year on whether more will launch across the country. The George brand, first launched in 1989 by fashion guru George Davies, changed the game as the UK's first supermarket clothing label. By 2004, it had become the nation's biggest clothing retailer, and today it's still going strong, racking up 260 million visits a year to its site and stocking shelves in 560 stores. How to save at Asda Shop the budget range Savvy shopper Eilish Stout-Cairns recommends that shoppers grab items from Asda's Just Essentials range. She said: " Asda's budget range is easy to spot as it's bright yellow! Keep your eyes peeled for yellow and you'll find their Just Essentials range. "It's great value and I've found it has a much wider selection of budget items compared to other supermarkets. Sign up to Asda Rewards The savvy-saver also presses on the importance of signing up to Asda's reward scheme. She said: "Asda Rewards is free to join and if you shop at Asda you should absolutely sign up. "As an Asda Rewards member, you'll get exclusive discounts and offers, and you'll also be able to earn 10% cashback on Star Products. "This will go straight into your cashpot, and once you've earned at least £1, you can transfer the money in your cashpot into ASDA vouchers. We've previously rounded up the best supermarket loyalty schemes - including the ones that will save you the most money. Eilish always suggests that shoppers looking to buy booze look out for bargain deals. She said: "Asda often has an alcohol offer on: buy six bottles and save 25%. "The offer includes selected bottles with red, white and rose options, as well as prosecco. There are usually lots of popular bottles included, for example, Oyster Bay Hawkes Bay Merlot, Oyster Bay Hawkes Bay Merlot and Freixenet Prosecco D.O.C. "Obviously, the more expensive the bottles you choose, the more you save." Join Facebook groups The savvy saver also recommends that fans of Asda join Facebook groups to keep in the know about the latest bargains in-store. Eilish said: "I recommend joining the Latest Deals Facebook Group to find out about the latest deals and new launches in store. "Every day, more than 250,000 deal hunters share their latest bargain finds and new releases. "For example, recently a member shared a picture of Asda's new Barbie range spotted in store. "Another member shared the bargain outdoor plants she picked up, including roses for 47p, blackcurrant bushes for 14p and topiary trees for 14p."
