Nearly two thirds of pensioners will pay income tax in three years after stealth raid

Almost two thirds of pensioners will be paying income tax in three years time because of Jeremy Hunt’s stealth tax raid, analysis has found.

Two years, ago the Chancellor said the level at which a person starts to pay income tax would be frozen at £12,570 until 2027/28 – dragging more people into the orbit of the tax every year.

At present, 57 per cent of people aged 65 and above are liable to pay income tax. Analysis by the House of Commons Library, commissioned by the Liberal Democrats, suggested that was set to soar to 62 per cent in three years as fiscal drag draws more pensioners in.

Mr Hunt’s decision means 1.6 million extra pensioners will be paying income tax by 2027/28 than would have done if the threshold for paying it had risen along with inflation since 2021/22.

Of these, around one million live in Conservative seats. Rishi Sunak’s constituency of Richmond, North Yorkshire, is one of the worst affected, with more than 3,600 pensioners likely to have to pay the extra tax.

In Mr Hunt’s seat of South West Surrey, almost 3,000 extra pensioners will be dragged into paying.

Sarah Olney, the Liberal Democrat Treasury spokeswoman, said: “This is a stealth tax scandal, and it’s pensioners who are paying the price. The Government has moved the goalposts, and as a result thousands of people are going to end up paying eye-watering extra tax.

“Our nation’s pensioners have worked hard and paid taxes most of their lives – they deserve a fair deal, not a stealth tax from this uncaring Government. The Conservatives have taken pensioners for granted and plunged many deep into debt during this cost of living crisis.”

The revelation comes after pensioners were hit in the pocket because they did not benefit from National Insurance cuts in the last two Budgets.

The state pension rose by 8.5 per cent in April, and this has already led to thousands of pensioners being drawn into paying income tax.

The Lib Dem analysis showed that seven of 33 Cabinet ministers represent the top 100 constituencies in which pensioners are being dragged into the stealth tax.

Ninety-six of the 100 seats with the most pensioners affected are held by Conservatives, including Gillian Keegan’s Chichester seat (with nearly 4,100 more paying), and Victoria Atkins’ Louth and Horncastle seat (4,200 more).

In 2010, when the Tories came to power, just 4.9 million pensioners paid income tax, but the Commons data revealed that could be 9.3 million by 2027/28.

In 2021, the threshold at which people start to pay income tax was frozen at £12,570 by Mr Sunak, with the freeze extended to the end of 2028 by Mr Hunt.

Without the stealth tax freeze, the allowance would have risen to £15,220 in 2024/25 and up to £15,990 in 2027/28. The full state pension for 2024/25 is £11,502 a year.