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Raise Personal Tax Allowance for State Pensioners From £12,570 Update as Key Threshold Looms
A two-year freeze on Income Tax thresholds could increase higher-rate taxpayers to 10.1 million, raising £8.3 billion annually and pulling more low-income workers and pensioners into tax.
- This month Chancellor Rachel Reeves could extend the freeze on Income Tax thresholds at the Budget, with the Institute for Fiscal Studies warning it would push ten million onto the 40% rate and add 790,000 more higher-rate payers.
- After freezes introduced in 2022, ministers note thresholds have pushed record numbers into higher bands, and advisers say extending freezes would raise significant revenue amid the spending gap.
- IFS projections show a two-year freeze would raise total Income Tax payers to 42.1 million, 960,000 more than planned, with 3.1 million families entitled to Universal Credit also paying tax.
- Politically, opponents argue Shadow Chancellor Sir Mel Stride condemned a two-year freeze, saying it drags households into higher bands and reduces real incomes as more pay the levy on the new State Pension.
- Policy options that lower thresholds would make someone on £960,000 pay £950 more and increase higher-rate payers, with all above £45,270 paying more tax.
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