Pensioners across the UK are being "dragged" into paying tax due to frozen thresholds and rising state pensions, according to a finance expert.Shimeon Lee, policy analyst at the TaxPayers' Alliance, told GB News that elderly Britons are facing a "nasty surprise" if they were not expecting to be paying taxes.READ THE FULL STORY HERE
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00:00Studios, the policy analyst at the Taxpayers Alliance, Shimian Lee. Shimian, welcome to the show.
00:06The dreaded fiscal drag is something we talk about all the time on GB News. The tax thresholds stay
00:12the same, but of course, inflation goes up, your pay might go up, and that means more and more
00:18people are paying tax. But the levels of pension has been dragged in this year is simply astonishing.
00:24Tell us more. Well, you're absolutely right. Those with incomes under the personal allowance,
00:28which is about £12,500, generally do not pay taxes on their income. But because of these
00:33frozen tax thresholds, which have been frozen since 2021, more and more people are being dragged
00:38into paying taxes. That includes more people being dragged into paying the higher rate of income tax,
00:43but also a lot of pensioners were being dragged into paying taxes at all because of their state
00:48pension rising every year because of the triple lock. So the threshold stays the same, but the
00:54pension goes up, meaning more and more pensioners are being dragged into paying taxes.
00:57And give us an idea of the numbers of people that might be finding one of those dreaded brown
01:02envelopes plop on their doormat this year.
01:04So I think the analysis by The Telegraph was based on the number of simple assessments.
01:08Now, simple assessments are how HMRC collects taxes from those people who are not on pay-as-you-earn
01:13schemes. So, for example, pensioners, as well as those who are self-employed.
01:17I think the number has risen by a massive amount, about 75%. So it's gone up from around
01:21700,000 to about 1.3 million.
01:241.3 million people will find themselves paying tax, whereas previously they didn't. Now,
01:30this marks the highest number on record and more than double the average annual volume
01:37for the previous six years. A lot of pensioners who've worked hard their entire lives,
01:43they get the full state pension. That's around about £11,973. They've only got to earn,
01:49through their own private pensions or work on the side, whatever, £527, and they're going to
01:56fall into the tax bracket.
01:58Well, you're right. Actually, this is quite symbolic of how the government sort of gives
02:01with one hand and takes with the other. Now, frozen tax thresholds affect the poorest people
02:05in the country the most. And it can be really a nasty surprise for those people who did not expect
02:09to be paying taxes and who are already struggling to make ends meet. Now, the personal allowance
02:13should be, if it had risen with inflation, so if it had not been frozen, it should be around
02:17£15,500.
02:18That's a huge difference.
02:20It is. And that means that people are paying taxes on an additional £3,000 worth of income.
02:24Now, if you take the income tax rate of about 20% plus the national insurance rate of about 8%,
02:29that gives you about a 28% tax. And that would be equal to about 840 extra pounds for a basic rate
02:34taxpayer.
02:34So, 840 quid extra in tax, the winter fuel allowance grab, a lot of pensioners are still
02:41absolutely reeling from £300. That's over a grand's worth of extra tax revenue from people
02:47who have simply paid into the system their entire lives. And, Shimeon, it's going to start
02:52an entire conversation once again about pensioners politically feeling like a punching bag,
02:59feeling like a cash cow that could just be milked dry.
03:01Well, I think you're absolutely right on that point, in that taxes have been rising
03:05all across the country, not just on our pensions, but on everyone else as well. In fact, we're
03:09actually reaching about an 80-year high tax rate. The tax burden on this country is reaching
03:14an 80-year high. And, of course, it's not even clear whether or not HMRC will have the capacity
03:18to deal with all of these claims, because more people being dragged into the tax system
03:22obviously means a greater administrative burden for HMRC. In fact, last year, I think taxpayers
03:27collectively spent about 800 years on hold with HMRC. And adding about 700,000 new claims
03:34to that system is not likely to help things.
03:35I'm laughing slightly hysterically, Shimeon, because I've been one of them. Now, I fall to
03:41sleep with that music in my ears. It's a soundtrack to my nightmares. On a serious point, a lot of
03:46aged people very overwhelmed by the notion of having to do the paperwork, having to go online to fill this
03:51in. Is there a burden on their time to do this, or do they get automatically stabbed with a bill?
03:56What?
03:56Absolutely.