The raid on Britons’ finances is set to hit up to 900,000 pensions within months thanks to Prime Minister Rishi Sunak‘s six-year freeze on tax thresholds.
Hundreds of thousands of retirees who are claiming a married couple’s tax break will be landed with a levy on their state pension next year.
The allowance lets one person in a couple transfer one tenth of their tax-free allowance to their partner, saving up to £252 a year.
But recent jumps in the amount of cash handed out for state pensioners are now running up against tax thresholds that have remained the same – at £12,570 – since 2021.
The state pension is set to rise by 8.5 percent to £11,502 this April, making it worth 90 percent of the personal allowance for the first time.
Initially, this will land couples with a £39 tax bill, but that figure is expected to grow by the end of the decade if thresholds remain frozen.
Pensioners could face paying bills that stretch into hundreds of pounds if the current rules remain, undoing tax breaks brought in just 10 years ago.
Chancellor Jeremy Hunt is being urged to protect retirees from being hit by the levy, with ex-pensions minister Sir Stever Webb saying: “Large rises in the state pension coupled with freezes in tax allowances are dragging large numbers of pensioners into the tax net.
“Extra complexity arises for 900,000 pensioners using the marriage allowance, many of whom need to make a decision about whether to stop sharing their tax allowance now that they are becoming taxpayers in their own right.”
Sir Steve noted that HMRC itself has estimated that more than eight million pensioners will pay tax in 2024, with the number set to grow next year, putting the figure comfortably at majority status.
David Cameron introduced the marriage allowance back in 2015, when the state pension sat comfortably behind personal income tax allowances.