Freezing of personal tax allowances.

[northwestman]

www.msn.com/en-gb/money/other/what-is-fiscal-drag-and-how-new-stealth-tax-will-reduce-your-pay/ar-AA1kqkOl

Fiscal drag is when tax thresholds are not adjusted in line with rising inflation and increased wages, leading to more people being “dragged” into higher tax bands.

Freezing tax thresholds increases people’s taxable income without nominal tax rates actually increasing, which provides additional revenue for the Government.

According to the OBR, this stealth tax could see four million more lower wage workers paying the 20 per cent basic rate tax, three million more paying the 40 per cent higher rate, and 400,000 more on the top 45 per cent rate by 2029.

And analysis by the Resolution Foundation states that the average household in England and Wales could be up to £1,200 worse off per year by 2028, compared to if tax thresholds increased in line with inflation, even after the 2 per cent national insurance cut is taken into account.

[SeanBroseley]

Some nice charts from Tax Policy Associates on the comparative tax burden of OECD countries. www.taxpolicy.org.uk/2023/12/06/2023_oecd/

[northwestman]

On Saturday, the Government cut national insurance by two percentage points – from 12pc to 10pc – shaving off around £450 each year for 27 million average salaried workers on £35,400.

But experts say frozen tax thresholds have pushed many people into higher tax brackets, cancelling out the effect of national insurance boosts.

Adam Corlett, principal economist at think tank Resolution Foundation, said those earning less than £26,000 will find the £450 saving is offset when personal tax thresholds are frozen again in April – effectively acting like a tax rise.

The Institute for Fiscal Studies has also said that the rate cut to national insurance contributions (NICs) and planned freezes to income tax and NICs thresholds mean employees earning less than £29,000 will “almost all lose out”.

Those earning £35,000 will gain about £130 more from the NICs cut than they lose from April’s freeze on thresholds.

Daily Telegraph.

[northwestman]

The elephant in the room as I've stressed from the outset is the freezing of personal tax thresholds.

Even a cut in the basic rate of income tax will amount to far less than the continuation of this pernicious 'stealth tax', which thanks to the effects of inflation and wage growth is raking in billions more for the Government than was originally envisaged.

[staffordshrew]

Wily old Jeremy Hunt eh, makes a "tax cut",

but does it on the National Insurance so the pensioners don't get it.

tells us it will be a saving of £1000 for the "average" 2 income family - it's just over £900 and both have to be working 35 hours with both earning the "average" pay of £35,400.  However, many don't earn that much (it's the average, after all) and many families are one full time and the other only part time, so won't save anywhere near that much.

fails to mention that by the time the freeze on tax thresholds over the last few years is taken unto account the average family is still worse off.

[staffordshrew]

Jan 6, 2024 13:38:51 GMT 1 northwestman said:

On Saturday, the Government cut national insurance by two percentage points – from 12pc to 10pc – shaving off around £450 each year for 27 million average salaried workers on £35,400.

But experts say frozen tax thresholds have pushed many people into higher tax brackets, cancelling out the effect of national insurance boosts.

Adam Corlett, principal economist at think tank Resolution Foundation, said those earning less than £26,000 will find the £450 saving is offset when personal tax thresholds are frozen again in April – effectively acting like a tax rise.

The Institute for Fiscal Studies has also said that the rate cut to national insurance contributions (NICs) and planned freezes to income tax and NICs thresholds mean employees earning less than £29,000 will “almost all lose out”.

Those earning £35,000 will gain about £130 more from the NICs cut than they lose from April’s freeze on thresholds.

Daily Telegraph.

Having lost more than that in previous years while the threshold increase has been suspended and there was no NICs or income tax cut.

[northwestman]

Up to 1.6 million more pensioners will be paying income tax within four years as a result of Conservative stealth raids, new analysis has revealed.

As many as 9.3 million older people will be paying the tax by 2028 after the Government froze the threshold at which people start to pay.

Currently, 8.5 million pensioners pay income tax – but analysis by the House of Commons Library has found that the frozen threshold means an extra 1.6 million will pay the tax than would have done if the threshold had risen along with inflation since 2021.

That means around an extra 850,000 pensioners paying income tax in 2028 than this year, taking the number to 9.35 million – the highest on record. In 2010, when the Tories came to power, 4.9 million paid income tax.

The threshold at which people start to pay income tax was frozen at £12,570 by Rishi Sunak in 2021, and the freeze was extended to the end of 2028 by Mr Hunt.

It means that every year, more and more older people are having to pay the levy as their income from the state pension and private pensions increases along with inflation – known as fiscal drag. Without the freeze, the allowance would have risen to £15,220 in 2024-25 and up to £15,990 in 2027-28.

According to the Institute for Fiscal Studies (IFS), well over 60 per cent of over-65s now pay income tax, up from around 50 per cent in 2010.

Daily Telegraph.

[Deleted]

Perhaps it will all change under the Labour government?

[rob62]

The freezing of tax thresholds is a sneaky stealth tax. The Chancellor must think we are stupid if he thinks the British people haven't noticed this.
With such high levels of inflation and if you are lucky pay rises to match, most people are paying more tax.
The N.I. cut is a gimmick.
The threshold needs raising to at least 15 thousand.
Before long most pensioners will have to complete a tax return unless the starting point for paying tax is raised

[staffordshrew]

Harvey Jones in the Daily Express Money Section: 'The number of pensioners paying income tax in retirement has shot up from fewer than five million in 2010 to more than 8.5 million today. Now it's going to climb yet again, starting from Monday, April 8.
As I reported last month, an extra 650,000 pensioners will pay income tax for the first time in retirement from next week, thanks to Chancellor Jeremy Hunt's decision to freeze the personal allowance at £12,570 for six years.
In total, more than 1.6 million more pensioners will pay income tax over the next four years.
The great pensioner stealth tax raid starts to bite from Monday, when the state pension is increased by 8.5 percent, thanks to the triple lock.
This will lift the new state pension to £11,501 a year, for those who get the maximum amount. While this is below the personal allowance, at which earnings become liable for income tax, many will be pushed above it by the income from their company and personal pensions.
When deciding what people owe, the taxman will take into account all sources of income, including from annuities, part-time jobs and other savings and investments.
HMRC will not deduct money from the state pension. Instead, it will usually deduct the extra tax owed through the PAYE system after adjusting the pensioner's tax code.
This will be done automatically in most cases (but not all).
It means that people will receive less from their workplace or private pension. To many, it will come as a shock. Others may find themselves in an even worse position.
Pensioners who have income from other sources, such as a job, non-ISA retirement savings or property, may have to complete a self-assessment tax return.
Many will be doing this for the first time and are likely to find the process stressful and complicated. The scope for errors is huge.
HMRC will also keep tabs on tax that cannot be automatically taken out of income, using a system known as "simple assessment”. In this case, it will hit pensioners with an unexpected income tax bill months after the tax year has ended.
Those whose income becomes liable to tax for the first time in the 2024/25 tax year, will receive their demand in the summer or autumn of 2025.
By that time, the tax owed may have been long spent.
Tax experts, including Andrew Tully, technical services director at Nucleus Financial, are urging people to be aware of the danger and set money aside to pay any bill. "It may be tricky working what you owe, though."
Any tax owed must be paid within three months of the simple assessment, or by January 31, 2026.
Older pensioners who retired before April 6, 2016 on the basic state pension may also find themselves caught in HMRC's stealth tax trap.
In some cases, they will have to pay income tax on their state pension.
The basic state pension will also increase by 8.5 percent from next week, but it will pay a lower amount of just £8,814 a year.
That is some way below the personal allowance. However, many older retirees will also receive additional state pension, such as the state second pension (S2P) or state earnings-related pension scheme (Serps).
In some cases, this will lift their total state pension above £12,570, where it will be taxed.
There is also no certainty that HMRC will get it sums right, given the complexity of the case. So people have to sit down and work out what they really owe, adding to the difficulties.
It's all going to be incredibly complicated, while advice and support from HMRC will be in short supply, as its helplines are in disarray.
If that wasn't bad enough, many of those hardest-hit will be older pensioners, who may struggle with the complexities involved.
A large number will be older women who may never have done a tax return in their lives.
Simple assessment is anything but simple. Frankly, it's going to be horrendous'.

[Minormorris64]

Apr 3, 2024 18:25:29 GMT 1 staffordshrew said:

Harvey Jones in the Daily Express Money Section: 'The number of pensioners paying income tax in retirement has shot up from fewer than five million in 2010 to more than 8.5 million today. Now it's going to climb yet again, starting from Monday, April 8.
As I reported last month, an extra 650,000 pensioners will pay income tax for the first time in retirement from next week, thanks to Chancellor Jeremy Hunt's decision to freeze the personal allowance at £12,570 for six years.
In total, more than 1.6 million more pensioners will pay income tax over the next four years.
The great pensioner stealth tax raid starts to bite from Monday, when the state pension is increased by 8.5 percent, thanks to the triple lock.
This will lift the new state pension to £11,501 a year, for those who get the maximum amount. While this is below the personal allowance, at which earnings become liable for income tax, many will be pushed above it by the income from their company and personal pensions.
When deciding what people owe, the taxman will take into account all sources of income, including from annuities, part-time jobs and other savings and investments.
HMRC will not deduct money from the state pension. Instead, it will usually deduct the extra tax owed through the PAYE system after adjusting the pensioner's tax code.
This will be done automatically in most cases (but not all).
It means that people will receive less from their workplace or private pension. To many, it will come as a shock. Others may find themselves in an even worse position.
Pensioners who have income from other sources, such as a job, non-ISA retirement savings or property, may have to complete a self-assessment tax return.
Many will be doing this for the first time and are likely to find the process stressful and complicated. The scope for errors is huge.
HMRC will also keep tabs on tax that cannot be automatically taken out of income, using a system known as "simple assessment”. In this case, it will hit pensioners with an unexpected income tax bill months after the tax year has ended.
Those whose income becomes liable to tax for the first time in the 2024/25 tax year, will receive their demand in the summer or autumn of 2025.
By that time, the tax owed may have been long spent.
Tax experts, including Andrew Tully, technical services director at Nucleus Financial, are urging people to be aware of the danger and set money aside to pay any bill. "It may be tricky working what you owe, though."
Any tax owed must be paid within three months of the simple assessment, or by January 31, 2026.
Older pensioners who retired before April 6, 2016 on the basic state pension may also find themselves caught in HMRC's stealth tax trap.
In some cases, they will have to pay income tax on their state pension.
The basic state pension will also increase by 8.5 percent from next week, but it will pay a lower amount of just £8,814 a year.
That is some way below the personal allowance. However, many older retirees will also receive additional state pension, such as the state second pension (S2P) or state earnings-related pension scheme (Serps).
In some cases, this will lift their total state pension above £12,570, where it will be taxed.
There is also no certainty that HMRC will get it sums right, given the complexity of the case. So people have to sit down and work out what they really owe, adding to the difficulties.
It's all going to be incredibly complicated, while advice and support from HMRC will be in short supply, as its helplines are in disarray.
If that wasn't bad enough, many of those hardest-hit will be older pensioners, who may struggle with the complexities involved.
A large number will be older women who may never have done a tax return in their lives.
Simple assessment is anything but simple. Frankly, it's going to be horrendous'.

But in ACTUAL cash terms how much is is it?

[staffordshrew]

Apr 18, 2024 19:49:08 GMT 1 Minormorris64 said:

Apr 3, 2024 18:25:29 GMT 1 staffordshrew said:

Harvey Jones in the Daily Express Money Section: 'The number of pensioners paying income tax in retirement has shot up from fewer than five million in 2010 to more than 8.5 million today. Now it's going to climb yet again, starting from Monday, April 8.
As I reported last month, an extra 650,000 pensioners will pay income tax for the first time in retirement from next week, thanks to Chancellor Jeremy Hunt's decision to freeze the personal allowance at £12,570 for six years.
In total, more than 1.6 million more pensioners will pay income tax over the next four years.
The great pensioner stealth tax raid starts to bite from Monday, when the state pension is increased by 8.5 percent, thanks to the triple lock.
This will lift the new state pension to £11,501 a year, for those who get the maximum amount. While this is below the personal allowance, at which earnings become liable for income tax, many will be pushed above it by the income from their company and personal pensions.
When deciding what people owe, the taxman will take into account all sources of income, including from annuities, part-time jobs and other savings and investments.
HMRC will not deduct money from the state pension. Instead, it will usually deduct the extra tax owed through the PAYE system after adjusting the pensioner's tax code.
This will be done automatically in most cases (but not all).
It means that people will receive less from their workplace or private pension. To many, it will come as a shock. Others may find themselves in an even worse position.
Pensioners who have income from other sources, such as a job, non-ISA retirement savings or property, may have to complete a self-assessment tax return.
Many will be doing this for the first time and are likely to find the process stressful and complicated. The scope for errors is huge.
HMRC will also keep tabs on tax that cannot be automatically taken out of income, using a system known as "simple assessment”. In this case, it will hit pensioners with an unexpected income tax bill months after the tax year has ended.
Those whose income becomes liable to tax for the first time in the 2024/25 tax year, will receive their demand in the summer or autumn of 2025.
By that time, the tax owed may have been long spent.
Tax experts, including Andrew Tully, technical services director at Nucleus Financial, are urging people to be aware of the danger and set money aside to pay any bill. "It may be tricky working what you owe, though."
Any tax owed must be paid within three months of the simple assessment, or by January 31, 2026.
Older pensioners who retired before April 6, 2016 on the basic state pension may also find themselves caught in HMRC's stealth tax trap.
In some cases, they will have to pay income tax on their state pension.
The basic state pension will also increase by 8.5 percent from next week, but it will pay a lower amount of just £8,814 a year.
That is some way below the personal allowance. However, many older retirees will also receive additional state pension, such as the state second pension (S2P) or state earnings-related pension scheme (Serps).
In some cases, this will lift their total state pension above £12,570, where it will be taxed.
There is also no certainty that HMRC will get it sums right, given the complexity of the case. So people have to sit down and work out what they really owe, adding to the difficulties.
It's all going to be incredibly complicated, while advice and support from HMRC will be in short supply, as its helplines are in disarray.
If that wasn't bad enough, many of those hardest-hit will be older pensioners, who may struggle with the complexities involved.
A large number will be older women who may never have done a tax return in their lives.
Simple assessment is anything but simple. Frankly, it's going to be horrendous'.

But in ACTUAL cash terms how much is is it?

That obviously depends on how much ACTUAL cash an individual is getting bearing in mind these considerations:

The amount you can receive before paying tax has not been increased for years, so more people are dragged into paying tax.

A 2$ cut in NI to pretend to give a little respite to wage earners doesn't apply to pensioners as they don't pay NI, having completed their NI payments sufficiently to get whatever level of state pension they have earned.

Those with savings or investments will also need to watch out for the sneakily reduced thresholds for the amount of interest and capital gains they can receive before having to pay tax.

[northwestman]

And yet Sunak persists with the lie that everyone will be £900 better off. Shameful.