British pensioners with income tax may be concerned to learn that they stand to lose £1,000 in Chancellor of the Exchequer Jeremy Hunt's new Budget. His proposal to freeze the personal allowance means your take-home pay will shrink. Together with inflation driving up costs, this loss of income will put a strain on your budget.
Jeremy Hunt's Budget Cuts Hit Tax-Paying Pensioners Hard
The UK's Chancellor of the Exchequer, Jeremy Hunt, has announced budget cuts in 2024 that will have a negative impact on tax-paying pensioners. According to analysis by the Resolution Foundation, an independent think tank, each of the estimated Eight million pensioners who pay income tax will lose an average of £1,000 a year as a result of Hunt's budget. As the basic rate threshold of £12,570 and higher rate threshold of £50,000 are frozen, fiscal drag will push more of pensioners’ income into higher tax brackets, increasing their tax bills.
Hunt's budget represents a reversal of Conservative policy since 2010 to support pensioners. Torsten Bell, CEO of the Resolution Foundation, said, "Jeremy Hunt's biggest decision was to cut taxes for younger workers while allowing taxes to rise for eight million pensioners. This is a stunning reversal of the approach taken by Conservative governments since 2010". Previously, the triple lock protected pensioners' incomes, but Hunt's budget prioritises younger workers over pensioners.
The policy of freezing tax thresholds, known as fiscal drag, is essentially a stealth tax. As the cost of living rises with inflation, earnings and pensions must increase to maintain the same standard of living. However, because the thresholds do not rise with inflation, a greater proportion of income is taxed at a higher rate. As a result, according to the Institute for Fiscal Studies, the number of over-65s paying income tax has risen from 50% in 2010-11 to 68% today.
Criticism of the Budget
Critics argue that Hunt's Budget will reduce living standards, with real household disposable income set to fall by 0.9%.
The last likely Budget before the General Election showed that this Parliament has been marked by stagnant growth, falling living standards and a significant redistribution from the old and rich to the young and poor.
However, Hunt rejected the claim, saying: "We have done an enormous amount for pensioners. This government introduced the triple lock ... we have really prioritised pensioners".
The 2024 Budget's impact on pensioners highlights the difficult trade-offs involved in designing policies to help different groups. While the government aims to increase incomes for working families, pensioners on fixed incomes also need support, particularly in the face of rising costs.
Balancing these priorities will be an ongoing challenge, but politicians must take account of the regressive effects of the Budget and protect the most vulnerable.