Chancellor Jeremy Hunt has confirmed that a freeze on tax thresholds will remain in place until 2028 if the Conservatives win the general election. This is despite the party’s recent vow to raise the personal allowance for pensioners as part of its ‘triple lock plus’ policy.
Under ‘triple lock plus’, Prime Minister Rishi Sunak has proposed that the ‘personal allowance’ for those over state pension age would also increase by the highest of average earnings growth, inflation or 2.5%.
However, reports suggest the pledge would not apply to those below state pension age.
Tom Selby, director of public policy at AJ Bell, warned that the different treatment of pensioners risks alienating voters, with the number of people forced into paying more income tax through fiscal drag set to rise.
According to the OBR, the freeze on tax thresholds will see almost 4 million extra taxpayers by 2028-2029, with 2.7 million moved to the higher rate and another 600,000 paying the additional rate.
Selby said: “Working families might understandably feel more than a little aggrieved that having committed to ending the personal allowance freeze for pensioners, Rishi Sunak and Jeremy Hunt are not making a similar pledge for younger people. If tax thresholds remain frozen until 2028, millions of Brits will be pulled into paying substantially more income tax through fiscal drag. This works in exactly the opposite direction to the National Insurance reductions announced by the government, not to mention the hints at further National Insurance cuts to come.”
The introduction of a different personal allowance for pensioners also risks complicating the tax system and adding unfairness between generations, said Selby. Had the personal allowance, currently frozen at £12,570 been inflation-linked since 2021/22, when the freeze was implemented, it would be forecast to rise to £15,989 by 2028, nearly £3,500 higher.
Selby added: “The Conservatives are effectively giving with one hand by lowering National Insurance and taking away with the other through the stealth tax of frozen thresholds. Creating a different personal allowance for pensioners will also complicate the tax system.This all adds up to a pretty incoherent approach to income tax and National Insurance policy which seems to be driven entirely by a desire to win over older voters ahead of the general election.”
