The Conservative government, led by Work and Pensions Secretary Mel Stride, has announced a “triple lock plus” policy aimed at providing significant tax cuts for pensioners.
“Millions of pensioners will get tax cuts worth hundreds of pounds over the next parliament”, Mel Stride told a news agency.
This policy includes a £2.4 billion annual tax reduction for pensioners, ensuring their personal tax allowance always rises in line with the triple lock mechanism, thus keeping it higher than the state pension.
Stride said, “Labour have described it as ‘desperate’ which I find quite extraordinary.”
Stride added, “By leaving the situation as it is at the moment we will see, by 2027, millions of pensioners being dragged into paying income tax. That’s what you’ll get under Labour.”
This move comes amidst criticisms that the Conservatives had previously frozen tax thresholds, leading to a scenario where pensioners start paying income tax at a lower threshold compared to younger individuals.
“We did have to freeze some thresholds as part of paying down what was £400bn that we spent, quite rightly, to protect people up and down the country, to make sure they could cope with the cost-of-living crisis that’s been difficult for us all as a consequence of Covid and high inflation because of the war between Ukraine and Russia.”
Mel Stride
He added they had taken “the bold and difficult decisions” to get the economy growing and bring down inflation. “What we are making a priority today is to cut the taxes of pensioners.”
Government To Clamp Down On Tax Evasion
To fund this policy, the government plans to clamp down on tax evasion, aiming to raise approximately £6 billion annually.
A new criminal offence will be applied to promoters of tax avoidance who fail to comply with a Stop Notice under the Promoters of Tax Avoidance Schemes (POTAS) regime.
This is aimed at stopping the continued promotion of tax avoidance schemes after receiving a Stop Notice.
The government will grant Her Majesty Revenue and Customs (HMRC) the power to apply to the court for a disqualification order against directors of companies involved in promoting tax avoidance, as well as other individuals who control or exercise influence over such companies.
This measure is intended to expedite the disqualification of directors and others involved in promoting tax avoidance, effectively removing them from the market and deterring others from engaging in similar activities.
The Disclosure of Tax Avoidance Schemes (DOTAS) rules will be amended to allow HMRC to obtain information and documents earlier, aiding in the identification of taxpayers using suspicious schemes.
This is part of strengthening the information powers of HMRC to combat tax avoidance more effectively.
This strategy is based on historical achievements in combating tax avoidance and evasion, with the National Audit Office supporting the feasibility of this target.
The funds raised from these efforts will not only cover the costs associated with the national service policy but also contribute significantly towards the tax cuts for pensioners.
Critics, including Paul Johnson from the Institute for Fiscal Studies, argue that the proposed tax cuts for pensioners are essentially reversing a tax increase that the Conservatives themselves had planned.
They suggest that the perceived savings are more about preventing further increases rather than genuine giveaways.
However, Torsten Bell from the Resolution Foundation highlights that the primary beneficiaries of this policy might be wealthier pensioner households, complicating the tax system further.
Despite these criticisms, the Conservative government maintains that its approach is focused on supporting pensioners financially, contrasting it with the potential impact of Labour’s policies, which they claim could lead to millions of pensioners being subjected to income tax for the first time.
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