One group of the population are being hit with what many claim to be an ‘unfair’ tax, which could directly target pensioners finances as soon as next April, according to an expert
Millions of pensioners are on the cusp of being pulled into the income tax net due to what critics are calling an “unfair” tax band system.
By 2027, the full state pension rate is expected to surpass the personal allowance threshold – the point at which individuals start paying tax. And come next April, it’ll be hovering just below it. This means that millions of pensioners who rely solely on the state pension for their income will be forced to cough up income tax unless the Government steps in to make some changes.
Pressure is mounting on ministers to address the issue, with many arguing that it’s grossly unfair to hit pensioners with what’s essentially a “stealth tax”. Those with modest private pensions or other sources of income are already feeling the pinch.
Tax bands have been stuck in a deep freeze since 2021, while the state pension has been creeping up each year thanks to the triple lock policy. This has brought it perilously close to the £12,570 threshold, reports Birmingham Live.
With tax bands frozen in time, more and more people are being dragged into higher tax brackets every year.
A spokesperson for finance experts Spencer Churchill Claims Advice warned: “If the triple lock stays in place, it’s highly likely that by April 2027 the full state pension will actually surpass the personal allowance threshold.
“That would mean some pensioners paying income tax purely on their state pension, something the Government will find politically difficult to justify. The Government faces a difficult balancing act.
“Removing the freeze on the personal allowance would cost billions at a time when fiscal headroom is already limited, yet scaling back the triple lock risks alienating older voters before the next election.”
Elsewhere, state pensioners and other benefit claimants may be in line for an extra tax-free payment from the Department for Work and Pensions (DWP) before the year is out. Those who are eligible will typically get this bonus automatically, but you may want to check your eligibility for the one-off payment.
The extra £10 payment, known as the Christmas Bonus, is usually awarded to those who are claiming specific benefits during the first week of December, referred to as the ‘qualifying week’. The bonus typically lands in bank accounts before December 25, providing claimants with additional funds for the festive season.
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