More than 1.2 million pensioners will be dragged into paying income tax this year due to the Tory “stealth” tax freeze, according to the Liberal Democrats.
The personal allowance threshold, which includes pensions, has sat at £12,570 for the last three years – meaning people don’t need to pay tax on income below this figure.
The tax freeze is set to expire by 2027 when the Lib Dems predict that the threshold would have risen to £15,990 had it been linked to inflation. Until then, more people will be paying higher rate income tax.
The findings came as pensioners prepared for a small financial boost this month. The state pension usually rises in April each year, aligning with the new tax year, rising costs and inflation. It means that the 12 million people who claim a state pension in the UK will start receiving extra cash this month.
The general election is just around the corner and pensions have been a big focus for the Government as it aims to win over voters and show its commitment to older people.
The chancellor, Jeremy Hunt, maintained last month that the Tories would keep the triple lock in place, meaning pensions will rise year on year usually in line with inflation or wage increases. However, the stealth tax freeze suggests that some people may not be better off.
Find out how to check the new state pension rates and how much pensioners should be receiving.
When does the state pension increase?
New state pension rates came into force on April 6, 2024, and they are unlikely to change again until the same time the following year.
New pension rates for 2024/25
The pension rates will increase by 8.5% this tax year, a little lower than last year’s increase of 10.1%.
The 2024/2025 state pension rates have increased in line with inflation, aligning with the triple-lock guarantee provided by the government.
As a result, pensioners will receive either of the following, based on eligibility criteria:
£221.20 a week (new flat rate);
£169.50 a week (old basic state pension).
How to check your state pension forecast
According to the State of Ageing report, almost one in five pensioners in the UK live in relative poverty. Unfortunately, that number is expected to grow. This inequality, the report claimed, often arises from a history of low-paying jobs, time out of work and part-time employment, and it disproportionately affects women and disabled people.
As a result, it’s important to check what you may be eligible for during your retirement.
MoneySavingExpert.com founder Martin Lewis previously issued a warning to people aged between 45 and 70 to check their state pension summary and their national insurance record for any gaps. Clearing any shortfalls in national insurance contributions could allow people to claim the full new state pension, which is now worth more.
You can check your state pension forecast on the government website.
The state pension amount people will receive depends on how much they have contributed to national insurance or have earned in pension credit.
How to check your national insurance record
Anyone can check their national insurance record on the government website using their national insurance number.
People need to make national insurance contributions to access the state pension.
Generally, 10 years is enough to get some kind of state pension. But people need 35 qualifying years to receive the new full state pension.
If there are gaps in the national insurance record, people are usually able to make voluntary contributions to make up the shortfall.
