Income Tax bands frozen till April 2028 view?

Dazed_and_C0nfused

Silvertabby said:

dunstonh said:

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

I agree.  If next year's CPI increase is 8%, that will take the nSP to £11,448.  Even more modest increases over the following 3 years could take the nSP alone over the current personal tax allowance.

My bet is on an increase in the personal allowance, taking it to an amount just over the nSP, being announced if/when CPI takes the nSP over £12570.  

There will be some people who have applied for Marriage Allowance and could in theory become taxpayers from 2024-25 with just a 6.8% increase to the standard new State Pension next April.

SouthCoastBoy

Dazed_and_C0nfused said:

Silvertabby said:

dunstonh said:

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

I agree.  If next year's CPI increase is 8%, that will take the nSP to £11,448.  Even more modest increases over the following 3 years could take the nSP alone over the current personal tax allowance.

My bet is on an increase in the personal allowance, taking it to an amount just over the nSP, being announced if/when CPI takes the nSP over £12570.  

There will be some people who have applied for Marriage Allowance and could in theory become taxpayers from 2024-25 with just a 6.8% increase to the standard new State Pension next April.

The one phrase that jumps out at me in that statement is "just a 6.8% increase", how times have changed!

jimi_man

sevenhills said:

jimi_man said:

A few more years of high inflation will push me into the higher tax bracket with my pension if the freeze continues. 

Well they changed the pension lifetime allowance, they will have to tax the rich somehow.

Well I have to say I’d never classify myself as rich. I was in the police and the second lowest rank. 

Fortunately being a DB pension the LTA was never going to be too much of an issue. 

RogerPensionGuy

jimi_man said:

sevenhills said:

jimi_man said:

A few more years of high inflation will push me into the higher tax bracket with my pension if the freeze continues. 

Well they changed the pension lifetime allowance, they will have to tax the rich somehow.

Well I have to say I’d never classify myself as rich. I was in the police and the second lowest rank. 

Fortunately being a DB pension the LTA was never going to be too much of an issue. 

I thought the LTA at 1.5M and 1.8M may never be an issue for me maybe. 

However at 1M I was feeling very different and there was plenty talk the last few years it may of dropped to 800K, so I never say never, just look at inflation now.

dunstonh

jimi_man said:

sevenhills said:

jimi_man said:

A few more years of high inflation will push me into the higher tax bracket with my pension if the freeze continues. 

Well they changed the pension lifetime allowance, they will have to tax the rich somehow.

Well I have to say I’d never classify myself as rich. I was in the police and the second lowest rank. 

Fortunately being a DB pension the LTA was never going to be too much of an issue. 

Lots of police officers were on track to breach the LTA.  It only takes about £50k a year earnings and sufficient service to get a DB pension over that.   

This is why when Labour said that they would reintroduce it, the unions/lobby groups for police, teachers and firefighters came out and said they wanted carve-outs like the doctors.   And apparently, nurses are not happy that they would not be included in the carve-out too.

Steve_666_

dunstonh said:

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

and the additional admin costs for HMRC !

NedS

Steve_666_ said:

dunstonh said:

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

and the additional admin costs for HMRC !

Not to mention how many 70+ year olds are capable of understanding they need to complete a tax return, let alone doing it and doing it correctly. Recipe for disaster

RG2015

Silvertabby said:

Another way of looking at it is that if the personal allowance had only risen by CPI since 2010 then it would have only just reached its current level.

Instead, we have enjoyed the higher level for some time now.  A case of 'jam yesterday for bread tomorrow'?

Yes, and people forget those headline grabbing increases. I think that the basic state pension level is a good level for the personal allowance. This is a vote winner and also saves HMRC the additional administration costs for those without any other pension income.

If CPI inflation falls over the next four years then the SP may remain below the personal allowance. This would be a good outcome for several reasons and possibly what the Government had in mind. I forget which of the last few Chancellors of the Exchequer introduced it.

Edit. Sunak froze it for 4 years in March 2021 and Hunt extended it for a further 2 years in the autumn 2022 financial statement.

SouthCoastBoy

I think inflation at 5%+ will be around for a while due to the fact we consume more than we produce, benefits are a big problem that feeds into this, therefore I can see the triple lock being abandoned with the argument the poorest pensioners are protected by the benefits system, and therefore the sp may not breach the tax free threshold. 

Dazed_and_C0nfused

NedS said:

Steve_666_ said:

dunstonh said:

I think the personal allowance will increase if the triple lock remains.    The problem is the state pension.   If the PA remains as it is (as planned), then within a short period, it will make virtually everyone with a state pension a taxpayer.   It will create an expensive situation where current non-taxpayers with no other income source will need to pay HMRC.      

and the additional admin costs for HMRC !

Not to mention how many 70+ year olds are capable of understanding they need to complete a tax return, let alone doing it and doing it correctly. Recipe for disaster

Being liable to tax on the State Pension isn't in itself a reason to complete a tax return anymore.

HMRC introduced Simple Assessments as a way round that.