As speculation mounts about the Autumn Budget, attention is turning to the possibility of a ‘Retirement Tax’. But what is it, and how would it impact pensioners?
Following the cancellation of the Winter Fuel Allowance, many pensioners may be feeling a little nervous, especially following government warnings of ‘difficult’ and ‘painful’ decisions ahead.
The good news is that the state pension triple-lock has been retained, with the new pension expected to rise by more than £400 per annum from April 2025, and experts think an explicit ‘pensions tax’ is unlikely.
The government have thus far avoided any commitment to a triple lock plus proposal, which would see a personal allowance match the state pension. However, the issue that will confront the Chancellor of the Exchequer Rachel Reeves and her team is the looming state pension ‘tax iceberg’, with the full new state pension on course to exceed personal allowances in the next few years.
Approximately 6.7 million pensioners are already paying tax on their state pension, and this figure is projected to increase to 8.5 million in 2024/25, as more pensioners find themselves subject to income tax. The government has promised to review the pensions sector to assess improvements to outcomes and galvanise investment in UK markets. This could see them target pension tax relief and the 25% tax-free cash rule on pension withdrawals.
If you are retirement planning in Cheshire, contact local specialists Hartey Wealth Management today for tailored pension advice on how to manage any changes to your tax status.