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Clause 2 - Personal allowance for 2013-14 for those born after 5 April 1948

Part of Finance (No. 2) Bill – in a Public Bill Committee at 4:30 pm on 23rd April 2013.

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Photo of David Gauke David Gauke The Exchequer Secretary 4:30 pm, 23rd April 2013

My hon. Friend is absolutely right. He makes a very good point, and it would not be responsible for us to try to pretend that there was not a big deficit that we needed to address.

Amendment 7 asks the Government to review the impact of the change to age-related allowances on anyone who reached the age of 65 on or after April 2013. We do not need to undertake a review to do that; I can set out now the impact of the tax changes on someone who reaches the age of 65 on or after April 2013. Basic rate taxpayers who turn 65 in this tax year will be among those who benefit from the largest ever cash increase in the personal allowance of £1,335. They will, therefore, receive the cash gain of £267 that I have already outlined. As a result of the increase in the  personal allowance under this Government, they will be nearly £600 better off in cash terms than they were in 2010.

I am sure the Opposition’s intention in tabling the amendment was to highlight our decision to withdraw age-related allowances for new recipients. Those who turn 65 this year would previously have qualified to receive an age-related allowance, but given our commitment to increasing the personal allowance to £10,000, there is no need to have a separate allowance for older people. The reforms will simplify the system and bring thousands of people out of self-assessment when all the allowances are aligned. More than 5 million of the poorest pensioners will not be affected at all by the changes, because half of those over the age of 65 pay no income tax. Nobody will pay more tax in 2013-14 than in 2012-13 due to the withdrawal of age-related allowances alone. There are no cash losers.

The Government remain committed to supporting pensioners in other ways. Our triple lock means that the state pension will be uprated each year by whichever is highest: earnings, CPI inflation or 2.5%.