State Pension taxable

Aretnap

https://forums.moneysavingexpert.com/discussion/comment/81886527#Comment_81886527

At most 20% of future increases will be offset by additional tax. Unless you're one of the few people lucky enough to be a higher rate taxpayer in retirement, in which case I'm sure you'll find a way of coping.

ClashCityRocker1

The freeze on tax thresholds raises a LOT of cash (Rachel reeves getting a whopping chunk in from this January) - taxes needed to go up and Labour promised not to raise taxes so they have just left the existing freeze in place.

I think higher thresholds and higher tax percentages would have been more targeted but would have blatantly breached manifesto.

Mr_Benn

I have no political bias. But the way both Parties have 'got away' with not changing the lowest Tax threshold for years, is a disgrace. I think its partly because the average worker probably doesnt understand the rules of 'threshold' they just look at the bottom lines.of their payslip.

Imagine trying to do that to the French !

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/81895774#Comment_81895774

I can understand it somewhat but not in conjunction with the basic and higher rate bands also being frozen.

In real terms, the personal allowance is still high. Higher than it was 15-20 years ago. So, fiscal drag is just bringing it back to historic norms.

In 20078 - it was £5,225. Increasing that by inflation would be around £9,250 today. (using ONS inflation uplift of 1.77 between those years)

The higher rate threshold was £34,600 in 2007/8. Applying the same 1.77 uplift for inflation gives £61,300.

jem16

https://forums.moneysavingexpert.com/discussion/comment/81895785#Comment_81895785

Even worse in Scotland where higher rate tax starts at £43,633 and at 42%.

Back in 2007/8 the ordinary classroom teacher wasn’t a higher rate taxpayer in Scotland. Now with the daft Scottish tax bands many are.

MK62

https://forums.moneysavingexpert.com/discussion/comment/81895785#Comment_81895785

Is that not a little bit misleading when viewed just on it's own though?……..several other things have changed over that time which more than offset this……basic rate tax has fallen to 20% from the 22% it was in 2007/8 (even though the 10% rate was also abolished), and employee NI is much lower now than it was then.

Someone earning £34600 back in 2007/8 would have seen 27.2% in govt deductions (ie income tax and NI), while the same person earning the inflation adjusted equivalent of £61300 today would, despite the freeze, be paying 24.8%. If you factored in pension contributions too, the gap is even wider …….

I'm in no way defending or justifying the freeze itself …….especially on the personal allowance with the disproportionate effect on lower income groups……so I'm in the opposite camp, where, to a degree, I can understand the freeze on the BR/HR/AR thresholds, but not on the personal allowance.