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'Tax bombshell' warning issued to more than one million people

The personal allowance threshold, the rate at which people start paying tax, has been frozen at its April 2021 level of £12,570

A warning about a 'tax bombshell' that could affect over one million people has been issued. The Liberal Democrats claim that more than one million pensioners will be forced to pay income tax due to the Government's so-called stealth tax freeze.

According to the political party's own research, it claims that by 2027-28, millions will be forced to pay as that's when the so-called stealth tax freeze ends. The end of the freeze will see the tax threshold rise to £15,990, reports Bristol Live.

The personal allowance threshold, which is the point at which people start paying tax, has been frozen at its April 2021 level of £12,570. According to an analysis from the House of Commons Library, it is estimated that 1.2 million pensioners will be forced to pay income tax in 2024-25.

By 2027-28, an additional 1.6 million pensioners will be paying income tax compared to if the personal allowance had increased with inflation. The latest figures from the Department for Work and Pensions show that 12.7 million people in Britain now receive the state pension.

The Institute for Fiscal Studies reports that 8.5 million people over the age of 65 are currently paying income tax, up from around 4.9 million in 2010. Separate analysis from the Resolution Foundation found that freezing income tax thresholds will leave the average taxpaying pensioner £1,000 worse off by 2027-28, or a collective loss of £8 billion.

Lib Dem spokesperson Sarah Olney said: "These stark figures reveal the stealth tax bombshell facing pensioners under this Conservative government. Older people who have worked hard and contributed all their lives are now being clobbered with years of unfair tax hikes.

"Jeremy Hunt's pensioner-punishing Budget will not be forgotten come the next election. The Conservative Party faces a reckoning at the ballot from older voters sick of being taken for granted."

Speaking to the Telegraph, former Tory pensions minister Baroness Altmann also expressed concern. She said: "I do think it is worrying that so many more pensioners could be dragged into the tax net as the state pension may soon rise above the frozen threshold. Most of those tipped into tax will be poorer pensioners with little more than their state pension to live on.

"Most of them will be unaware of any liability and never have filled in a tax return in their life. They are then at risk of being hit with fines and penalties for not paying a tiny amount of tax they didn't even know about."

On Monday (April 1), it emerged that HM Revenue and Customs is concerned its customer service helpline could be overwhelmed by the influx of Brits being hit by stealth taxes. However, the Treasury defended the freezing of tax thresholds.

A spokesperson told the Telegraph: "After providing hundreds of billions of pounds to protect lives and livelihoods throughout the pandemic and Putin's energy shock, we had to take some difficult decisions to help pay it back. Now the economy is turning a corner, we have cut National Insurance by a third, meaning that, coupled with above-inflation increases to personal tax thresholds since 2010, we have saved the average earner over £1,500 compared to what they otherwise would have paid."

source: https://www.leicestermercury.co.uk/news/uk-world-news/tax-bombshell-warning-issued-more-9200580?utm_source=mynewsassistant.com&utm_medium=referral&utm_campaign=embedded_search_item_desktop

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