Tax Allowances: Pensioners

Treasury written question – answered on 30th April 2012.

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Photo of Jessica Morden Jessica Morden Labour, Newport East

To ask the Chancellor of the Exchequer how many pensioners in (a) Newport East constituency and (b) Wales will be affected by the freeze in the age-related tax allowance.

Photo of Cathy Jamieson Cathy Jamieson Shadow Minister (Treasury)

To ask the Chancellor of the Exchequer how many people aged 65 years and over will have their age-related allowance frozen in (a) the UK, (b) Scotland and (c) each parliamentary constituency in the UK as a result of Budget 2012.

Photo of Rachel Reeves Rachel Reeves Shadow Chief Secretary to the Treasury

To ask the Chancellor of the Exchequer what estimate he has made of the number of individuals who will be affected by his decision to (a) freeze age-related allowances and (b) restrict age-related allowances to existing recipients from April 2013 in each (i) region, (ii) local authority and (iii) parliamentary constituency in (A) 2013-14, (B) 2014-15 and (C) 2015-16.

Photo of William Bain William Bain Shadow Minister (Scotland)

To ask the Chancellor of the Exchequer how many people in (a) Scotland, (b) each parliamentary constituency in Scotland and (c) each local authority area in Scotland aged (i) between 65 and 74 years and (ii) 75 years and over, will be in receipt of the age-related personal allowance (A) in and (B) each of the following two financial years; and if he will estimate what the average difference in pensioner income would be had the thresholds been uprated in line with inflation.

Photo of David Gauke David Gauke The Exchequer Secretary

holding answers 16 April 2012

The information is as follows:

(i)-(iii) The Government remains committed to supporting pensioners and has introduced a triple guarantee for the basic state pension ensuring it will increase each year by the highest of earnings, prices or 2.5%. From April 2012, the basic state pension increased by £5.30, the biggest cash increase ever. The Government has also protected other key pensioner benefits. The triple guarantee means that a full basic state pension will be over £120 per year higher than under the previous Government's uprating policy.

The 2012 Budget announced that from 2013-14, age-related allowances will: (a) be frozen at their 2012-13 levels until they align with the personal allowance; and (b) that they will no longer be available, except to those born on or before 5 April 1948 with the higher age-related allowance available only to those born before 5 April 1938.

These changes will simplify the personal allowance system and reduce the number of pensioners in self-assessment.

The “Overview of Tax Legislation and Rates” published alongside Budget 2012 states that, in 2013-14, an estimated 4.41 million individuals will be affected by these changes compared with RPI indexation of age-related allowances and no change to eligibility, though none will see any cash reduction in their personal allowance from April 2013 compared with 2012-13.

Estimates of numbers affected and average impacts on income tax paid at Government office region level are provided in the following table for 2013-14. Reliable estimates are not available at the local authority and parliamentary constituency levels due to greater uncertainties in making projections for small geographical areas.

Estimated impacts in 2013-14
  Number s affected (thousand) Average change in tax paid (£)
Government office region Freeze age-related allowance Restrict eligibility Combined changes Combined changes
North East 175 24 178 +84
North West and Merseyside 482 60 487 +83
Yorkshire and the Humber 358 46 363 +83
East Midlands 324 41 327 +82
West Midlands 377 48 381 +82
East of England 433 53 437 +81
London 356 43 358 +82
South East 641 80 648 +82
South West 450 60 455 +84
Wales 237 31 240 +83
Scotland 363 49 367 +84
Northern Ireland 89 13 91 +87
Address abroad/unknown 76 11 78 +87
United Kingdom 4,360 560 4,410 +83

Available information for tax years 2014-15 and 2015-16 is provided in the following table. Estimated impacts arising from the announced changes to eligibility for age-related allowances cannot be provided for tax years after 2013-14, as these will depend on the level of the personal allowance for under 65s.

The Government is committed to supporting lower and middle income earners by raising the personal allowance to £10,000, and removing the lowest income individuals out of income tax. Decisions on changes in the personal allowance from 2014-15 will be taken as part of the annual Budget process in the context of the wider public finances.

Number s affected by the freeze in age-related allowances from April 2013 in 2014-15 and 2015-16
Government office region 2014-15 2015-16
North East 189 205
North West and Merseyside 518 559
Yorkshire and the Humber 390 419
East Midlands 346 373
West Midlands 410 443
East of England 465 496
London 382 404
South East 685 730
South West 484 518
Wales 256 274
Scotland 395 423
Northern Ireland 98 106
Address abroad/unknown 85 92
United Kingdom 4,700 5,040

(iv) A projected 471,000 income taxpayers in Scotland are expected to benefit from age-related allowances in 2012-13, ie would pay more income tax if age-related allowances were not available in 2012-13. Within the total, 266,000 are aged 65-74 and 205,000 are aged 75 and over. Reliable estimates are not available at the local authority and parliamentary constituency levels due to greater uncertainties in making projections for small geographical areas.

All estimates are based on the 2009-10 Survey of Personal Incomes, projected using economic assumptions consistent with the Office for Budget Responsibility's March 2012 Economic and fiscal outlook.

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