More pensioners paying higher income tax amid 70 percent rise

Sturgeon says ‘UK economy is fundamentally on the wrong path’

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The number of pensioners paying higher levels of income tax has risen dramatically over the past ten years, according to new figures released under Freedom of Information laws. While in 2012 some 425,000 people aged 65 and over were paying either the higher rate or additional rates of income tax, by last year that figure had soared to 727,000.

Consecutive Conservative Governments of the past 12 years have been accused by critics of carrying out a “stealth tax raid” on elderly people.

The figures have not been published but were made available through a freedom of information request made by former pensions minister Steve Webb, who shared the results with The Telegraph.

The higher rate of income tax is currently set at 40 percent and the additional rate is 45 percent, with a basic rate of 20 percent.

Annual payouts from state and private pensions are taxed, as well as other income streams such as rental payments from second homes or payments for consultancy work.

In 2012 then-Chancellor George Osborne abolished the extra tax-free allowance that people aged 65 to 74 received, which at the time would have been around £2,400.

However, over the past decade thresholds have not risen in line with inflation, dragging more people into higher tax bands.

The pensions age in the UK has also increased from 65 to 66 in a move which will likely have also affected the situation.

Now a partner at pensions consultant LCP, Mr Webb told The Telegraph: “The majority of people in retirement can now expect to have tax deducted from their pensions.

“This proportion is set to increase as tax thresholds fail to keep pace with inflation-linked pension increases in the coming years.

“In addition, the highest rates of tax are now biting more heavily on pensioners, with nearly one in 10 pensioner taxpayers paying income tax at 40 per cent or above.

“Anyone planning for their retirement needs to allow for the fact that income tax is likely to take a chunk out of anything they have put by.”

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The Tory Party has overseen the tax burden rising to a 70-year high, in spite of the Conservatives supposedly being the party of low tax.

A Treasury spokesman said: “Our priority is to restore economic stability in the fairest way possible, which is why those with the broadest shoulders – from businesses to individuals – will bear more of the burden to strengthen public finances.

“The vast majority of people do not pay the higher rate, and we have lifted millions out of paying tax altogether by consistently raising personal tax thresholds over the last decade.

“We have supported over-65s by delivering on our promise to increase the state pension in line with rising prices and we have a plan that will help to more than halve inflation this year so that everyone’s incomes go further.”

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