EMBARGO: Immediate Release
New analysis from the Liberal Democrats has shown that a staggering 1 million pensioners in Conservative seats could be forced to pay income tax due to the Government’s stealth taxes.
Research from the House of Commons Library, commissioned by the Liberal Democrats shows that a staggering 1.6 million pensioners could be dragged into paying income tax in 2027-28.
The state pension rose by 8.5% in April which has already led to thousands of pensioners being drawn into paying income tax. The House of Commons Library estimates that by 2027-28, 62% of pension-age people will pay income tax, a huge jump from 57% in the current financial year (2024-25).
Separate Liberal Democrat analysis using the figures provided by the House of Commons Library has found that of the 1.6 million pensioners dragged into a higher rate by 2027-28, up to 1 million live in Conservative-held seats.
The analysis shows that 7 of 33 Cabinet Ministers are in the top 100 constituencies that are seeing pensioners dragged into the stealth tax. 96 of the top 100 seats that see the most pensioners affected are held by Conservative MPs.
Prime Minister Rishi Sunak’s constituency being the 32nd worst affected with over 3,600 pensioners likely to shell out on extra tax. Meanwhile, Ministers’ seats will see a staggering 88,189 pensioners affected.
The Liberal Democrats were the first major party to commit to the triple lock on pensions ahead of the upcoming election and have called on the Government to come clean about the effects of their unfair stealth tax. The party is calling for pensioners to use their vote in May’s local elections to send the Conservatives a message they can’t ignore.
Commenting Liberal Democrat Treasury Spokesperson Sarah Olney MP 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.
“Pensioners have a golden opportunity to send a message to Rishi Sunak and his Ministers at this May’s local elections.”
ENDS
Notes to Editors:
Reported in the Telegraph here
House of Commons Library research:
You asked about pensioners brought into income tax due to the personal allowance freeze.
The below estimates are fairly approximate and have been calculated using UKMOD, which is a policy simulation tool. There is more on the methodology at the end of this response.
Number of pensioners affected
Due to the personal allowance being frozen at its April 2021 level of £12,570, we estimate that there could be around:
100,000 - 200,000 additional income taxpayers aged 66 years and over in 2022/23
600,000 - 750,000 additional income taxpayers aged 66 years and over in 2023/24
1 million – 1.2 million additional income taxpayers aged 66 years and over in 2024/25
1.1 million – 1.3 million additional income taxpayers aged 66 years and over in 2025/26
1.3 million – 1.5 million additional income taxpayers aged 66 years and over in 2026/27
1.4 million – 1.6 million additional income taxpayers aged 66 years and over in 2027/28
Each figure shows the number of additional taxpayers compared with a situation in which the personal allowance increased by CPI inflation, which is the default policy.
Notes on methodology
Our analysis uses the UKMOD policy simulation model version B1.12 developed and maintained by the Centre for Microsimulation and Policy Analysis (CeMPA) at the University of Essex Institute for Social and Economic Research (ISER), supported by the Nuffield Foundation, with underlying data on household incomes and circumstances drawn from the 2021/22 Family Resources Survey, adjusted using data from the DWP’s Households Below Average Income, and uprated for later years using the OBR’s March 2024 forecasts. The UKMOD model is explained in more detail in CeMPA’s latest country report. We’ve made no attempt to assess the potential effect of behavioural response of people when faced with different tax thresholds.
Liberal Democrat constituency-level analysis of the House of Commons Library figures can be found here