Frozen allowances leave ‘dismayed’ pensioner facing tax on ‘meagre’ pension for first time | Personal Finance | Finance

A couple is facing a tax bill on their income for the first time due to the rising state pension and frozen allowances.

Jan, 72, and Terry Smith, 75, from Hampshire, who retired just over 10 years ago, voiced their “dismay” that a “large portion” of the triple lock increase this year on their pensions will now be returned to the Treasury through taxation.

State pension rates increased by 8.5 percent in line with the Triple Lock in April, which saw payments rise to £8,814 a year for those who receive the basic state pension, and £11,502 for those who receive the new state pension.

However, income tax allowances have been frozen since 2022, and are currently due to remain this way until 2026, despite rising benefit rates.

While Prime Minister Rishi Sunak may have recently announced personal allowances will increase for state pensions if the Conservative Party remain in power following July’s general election, it may be too little too late.

Mr Smith’s income – which Mrs Smith says combines the basic state pension and a “very small annuity”, now marginally exceeds the personal allowance threshold, which means he must now pay tax on his “little” income. According to Mrs Smith, he was recently slapped with a £299.80 income tax bill.

Mrs Smith said her “meagre” basic state pension income combines with an occupational pension of just over £5,800 a year, and she recently faced an income tax bill of £59.80.

Mrs Smith told Express Money: “I feel very resentful that I am paying so much tax on so little income, all because the personal allowances are frozen. £59.80 probably doesn’t sound like much, but it is to me.

“The Tories make so much of the Triple Lock, and how they have kept their election pledge, which is a bit of a joke when they are taking so much tax off my meagre income.”

In a recent letter to the Prime Minister, shared exclusively with Express.co.uk, Ms Smith penned: “I am writing on behalf of my husband, Terry, and myself in response to your pledge to ensure that the state pension will be covered by personal allowance if you gain power again.

“Your promise is that you will raise the personal allowances for those in receipt of state pension so that no tax will ever be payable on the state pension itself (going back to the days when those over the age of 65 received higher allowances to avoid the very problem that we have now).

“I hate to disillusion you, but my husband’s state pension (his only source, apart from a very small annuity), already exceeds the personal allowance of £12,570, so he is liable to pay tax on £1,499 of the total sum of £14,069.

“Putting it another way, a large portion of the triple lock increase applicable from April 2024, will be returned to the Treasury by means of taxation. I am sure that many other people, who do not have a voice, are in the same position.

“We receive the crumbs from your very rich table and we have to be satisfied with that.

“To live a moderate lifestyle as a couple, such as myself and my husband, would require an income of £43,100 after tax, outside of London.

“Unfortunately, we do not come anywhere near to that figure (I wish). It has been said that your swimming pool costs more to heat than my very modest total income, and you have the brass neck to allow personal allowances to remain stagnant, it obviously doesn’t have any effect on you and your rich buddies, so from your point of view it doesn’t matter.

“In February 2024, I wrote to Jeremy Hunt, expressing my dismay at this unfair abnormality, but I did not receive the courtesy of a reply. It’s a good job I wasn’t holding my breath.

“I am compelled to say that your party has been in power now for 14 years and what a mess you have made of everything. The infrastructure of our once-great country has collapsed.

“From potholes in the road to flooding, to polluted rivers and seas, crime, the Post Office scandal, handling of the Covid pandemic, lack of affordable projects (funny that you always find the money to squander) and worst of all, the disintegration of the NHS.

“There are many more awful failures and wrongdoings, too many to list here. It seems to me that there are a good number of parallels to Victorian Britain, which indicates the country is going backwards in many ways.

“From my perspective, not one of the promises you made at the beginning of your premiership, has been honoured, so you have not earned the trust of the nation. A legacy that only you and your clique can be proud of.”

Express.co.uk contacted the Conservative Party for comment, who have not responded.