Labour want YOU to pay £1,000 ‘Retirement Tax’ on your pension for first time in history, top Tories blast
LABOUR have refused to back a £295 tax break for pensioners - with the Tories branding them backers of a “Retirement Tax”.
The Conservative plan to take state pension out of income tax was branded a “gimmick” by Labour - who have ruled out meeting the £2.5 billion pledge.
Prime Minister Rishi Sunak has vowed that the state pension will never be taxed under the Conservatives under his ‘Triple Lock Plus’ plan.
Without adjusting the threshold, pensioners would be taxed on their state pension for the first time during the next Parliament.
Under the plan, the state pension will be protected by the triple lock AND the tax free allowance for pensioners will also be protected the same way.
It will mean pensioners will have nearly £2,000 more by 2029 than they do today under the proposals.
Next year alone, pensioners will receive a £100-a-year tax free allowance and an increase in the state pension of £428.
By the end of the next Parliament, the state pension will be up by £1,677 a year and the income tax cut will be worth £275.
Labour have committed to the triple lock but havent given the green light to the tax threshold going up as well which the Tories say will cost pensioners around £1,000 in total by the end of the next Parliament.
Treasury Minister Laura Trott said: “Labour have decided not to match our commitment to increasing personal tax thresholds for pensioners, dragging thousands of pensioners into a new Retirement Tax.
“This means that under a Labour government people on the basic state pension will be taxed for the first time in history.
“The choice is clear: stick with the Conservatives who have a clear plan and have taken bold action to ensure dignity in retirement, increasing the state pension by £3,700 since 2010 in cash terms, meaning pensioners are £900 better off every year.
“Or go back to square one with Sir Keir Starmer and the Labour Party.”
The policy will cost £2.4 billion a year by 2029/30 and be funded by clamping down on tax avoidance and tax evasion.
Both the state pension and the tax free allowance will go up in line with the higher of average earnings, inflation or 2.5 per cent.
Labour's Jonathan Ashworth said: “Why would anyone believe the Tories and Rishi Sunak on tax after they left the country with the highest tax burden in 70 years?
“This is just another desperate move from a chaotic Tory party torching any remaining facade of its claims to economic credibility.
But Paul Johnson, director of the Institute for Fiscal Studies, said it was “simply a reversal of a tax increase that the Conservatives proposed”.
He told the BBC: “Pensioners used to have a bigger personal allowance than people of working age - it was the Conservatives who got rid of it.
“So this is one of many examples actually of tax policy that has been reversed by the same Government.
"George Osborne got rid of it in the 2010s when the personal allowance of people under pension age continued to rise.
“So one of the consequences of that, actually, is that the point at which pensioners currently start to pay tax is below where it was in 2010, whereas the point at which the rest of us start to pay tax is well above where it was in 2010.
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“Secondly, it’s worth saying that in part, looking forward, this is simply a reversal of a tax increase that the Conservatives proposed.
“The idea is that the allowance doesn’t rise at all in line with inflation for the next three years. So half of the cost of this is simply not imposing the tax increase that was previously proposed.”