£41 billion “stealth tax bombshell” to cost pensioners £800 a year as Budget looms

EMBARGO: Immediate Release

The freeze to income tax thresholds will have cost pensioners £41.3 billion by the end of the decade since it was first introduced in 2022/23, House of Commons Library analysis commissioned by the Liberal Democrats has revealed.

It means that the typical pensioner hit by these freezes will be almost £800 a year worse off by 2029/30 with a tax hike worth £7.4 billion a year by the end of the decade. That is up from £590 million a year in 2022/23, a more than 12-fold increase of £6.8 billion a year in additional tax.

There has been heightened speculation that Rachel Reeves will extend these threshold freezes beyond 2027/28, when they were due to end. It is a timetable that she committed to upholding at the previous Budget but the Government is now failing to rule out an extension.

Across the 2022/23 - 2029/30 period, it is estimated that the number of pensioners paying income tax will have risen from 5.6 million to 7.6 million, a rise of 37%. It is pensioners in London, the South East and South West who will be most affected by the threshold freezes, with the average person affected losing out on £1,200, £1,150 and £1,050 respectively.

The Liberal Democrats said that the Chancellor needed to “stand by her word” and not extend the stealth tax freeze at the Budget. The party said that pensioners were “left out in the cold” following Labour’s Winter Fuel Payment cuts and could not stand another hammer blow in the midst of a cost of living crisis.

Liberal Democrat Work and Pensions Spokesperson, Steve Darling MP, said:

"This is a stealth tax bombshell that will hit pensioners hard, leaving those affected £800 a year worse off – and Labour is poised to make that nightmare even worse.

"Rachel Reeves once called extending these tax thresholds a policy that would 'hurt working people’. Now it's clear she's getting ready to copy the economic vandalism of the past.

"The Chancellor must stand by her word, rule out an extension to this outrageous tax freeze at the Budget, and stop hammering pensioners who have already been left out in the cold by skyrocketing energy prices and the disastrous Winter Fuel Payment scandal."

ENDS

Notes to Editors:

The House of Commons Library analysis can be found here. 

Originally reported on the Express front page -- see full story here.