Pensioners will never have to pay income tax on their state pension under plans to introduce a ‘Triple Lock Plus’, Rishi Sunak has announced.
In a bid to secure the ‘grey vote’, the Prime Minister promised to increase the personal allowance threshold for those aged over 66.
The Tories will maintain the triple lock, which ensures the state pension increases in line with the highest of either inflation, average wage growth or 2.5 per cent every year.
But they will also guarantee that pensioners’ personal allowances will always be higher than the level of the new state pension.
It comes after a backlash from pensioners following two cuts to National Insurance, which do not benefit them, and being dragged closer towards paying income tax by a combination of rising pensions but frozen thresholds. As revealed by the Mail, Chancellor Jeremy Hunt privately admitted he was getting ‘a lot of stick’ from older voters.
Prime Minister Rishi Sunak says the plan would give pensioners ‘peace of mind and security in retirement’ (Pictured during his visit to Chesham United Football Club)
Under the Triple Lock Plus plan, the personal allowance threshold for pensioners across the UK would rise
Last night Mr Sunak said the new plan showed the Tories are ‘on the side of pensioners’.
The Tories said the proposal would equate to a tax cut of around £100 for eight million pensioners next year – increasing to £300 in five years’ time. It will cost the Treasury £2.4billion a year by 2029/30 and be funded through a previously announced scheme to raise an extra £6billion a year by the end of the next Parliament by clamping down on tax evasion.
Under the Triple Lock Plus plan, the personal allowance threshold for pensioners across the UK would rise from the current baseline of £12,570 to £13,040 next year. It would then gradually increase to £14,450 by 2029/2030.
Mr Sunak, who visited Chesham United football ground in Hertfordshire yesterday, said: ‘Thanks to the Conservatives’ Triple Lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.
Chancellor Jeremy Hunt privately admitted he was getting ‘a lot of stick’ from older voters
‘This bold action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.’
The Tories expect the state pension to increase by a further £430 in April next year to more than £11,970; with increases by around £1,700 to £13,200 by the end of the Parliament.
Before 2012, pensioners had more generous tax allowances. But then-chancellor George Osborne axed the policy as he simplified the system – though faced a ‘granny tax’ backlash.
The Tories’ decision to announce an increase to the personal allowance for pensioners only also raises questions over whether they will look to increase the thresholds for working-age adults. The Government has come under fire for continuing to freeze the income tax personal allowance, which would otherwise have risen in line with inflation.
Shadow paymaster general Jonathan Ashworth, responding to the announcement, said last night: ‘Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?
‘This is just another desperate move from a chaotic Tory party torching any remaining facade of its claims to economic credibility.’