PENSIONERS PAY FOR OTHERS’ TAX CUTS
The Government is scrapping the extra tax free income that people over 65 have
been allowed since 1925. The surprise announcement in the 2012 Budget has
already been dubbed a ‘granny tax’.
For anyone born on 6 April 1948 or later there will be no higher allowance when
they reach 65 in April 2013. The 4.4 million who already get the higher ‘age
allowance’ will find it is frozen at its 2012/13 rates – it will never rise.
It will remain fixed at £10,500 for those born from 6 April 1938 to 5 April 1948
and at £10,660 for those born before 6 April 1938.
Although the Chancellor told Parliament “no pensioner will lose in cash terms”
the papers issued by HM Revenue & Customs show that 4.4 million over 65s will be
“worse off compared to 2012/13”. Their average loss will be £83 a year. And
there are another 360,000 aged 65 who will lose on average £285. Overall the
change will save the Treasury more than a billion pounds a year by 2015/16.
The personal allowance for younger people, by contrast, will rise well above
inflation. It will be £8,105 from April this year and will rise by £1,100 to
£9,205 from April 2013. The Coalition Government is committed to raising it to
£10,000. And at this rate that could well happen by 2014/15.
At that level it would be close to the over 65s allowances. And within another
year or two it could overtake them and then they will disappear even for those
who currently get them.
The rise in the tax-free allowance in 2013/14 will allow basic rate taxpayers to
keep an extra £220 – or £170 after inflation. But to help pay for it, the level
at which higher rate tax is paid will fall to £41,450 dragging another 300,000
people into the higher rate tax band. The gain for higher rate taxpayers from
the rise in the personal allowance will be only around £42.50 a year.
Pension
The Chancellor also announced that he will be going ahead with the new flat rate
state pension of around £140 a week. Full details will be published in the
summer. He also promised – if that is the right word – that there would be
further rises in state pension age as life expectancy grows. “There will be an
automatic review of the state pension age to ensure it keeps pace with increases
in longevity.”
Child Benefit
Anyone with an income over £50,000 will pay extra tax if they or their partner
or spouse gets child benefit. The extra tax will be on a sliding scale as income
rises from £50,000 to £60,000 and at that level will be as much as the child
benefit received. An estimated 840,000 million families will effectively lose
all their child benefit and another 360,000 will lose some of it. The biggest
losers will be parents who are aged 51 to 65 whose income is likely to be
higher. The new tax will start on 7 January 2013. Anyone earning more than
£50,000 will be written to later this year and will have to give more
information to HMRC. An extra 500,000 will have to fill in a self-assessment
form.
Houses
Anyone who buys a home for more than £2 million will have to pay a new rate of
Stamp Duty Land Tax of 7% which would cost a minimum of £140,005. On a home sold
for £4 million would be £280,000. Avoidance of SDLT by transferring a home into
a company will be ended.
The Government will look at the possibility of charging an annual tax on
companies or 'non-natural persons' which own a home worth more than £2 million.
A consultation paper will be issued later this year and the new tax could begin
in April 2013.
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