Pensioners to pay National Insurance! Rachel Reeves told to make raid | Personal Finance | Finance
Chancellor Rachel Reeves is under mounting pressure to drag Britain’s retirees into the national insurance net for the first time. And this isn’t some fringe idea by some minor pressure group or tax campaigner.
It comes from Labour’s favourite think tank, the Resolution Foundation, which has a direct line to Downing Street. Reeves’s autumn Budget is actually being written by Torsten Bell, who ran the Foundation for a decade before being parachute into a safe Labour seat at the last election.
He’s now minister for pensions and “masterminding” the Budget. And this is the exactly the type of tax hike he’d love.
Bell isn’t the only former Resolution Foundation high-up to rising up the Labour hierarchy.
Dan Tomlinson, once an economist at the think tank, has just been appointed as secretary to the Treasury.
Another former member, Baroness Minouche Shafik, has been brought in as Sir Keir Starmer’s new economic adviser after working closely with the Foundation.
When the Resolution Foundation speaks, Reeves listens. She has no choice. Everywhere she turns, they’re sitting there.
Its latest tax ploy would haul 8.7million pensioners into paying National Insurance (NI) for the first time. That’s more than two thirds of the UK’s near-13million retirees.
The Resolution Foundation reckons its plan could raise £6billion a year. That’s a tempting sum as Reeves desperately battles to balance the books.
In its election manifesto, Labour has promised not to hike income tax, NI or VAT. But the Resolution Foundation thinks it’s found a neat way round that pledge.
It tank wants the headline NI rate cut from 8% to 6%. It would then roll up the lower NI charge into income tax, but there’s a catch.
It would mean that millions who don’t currently pay NI, primarily pensioners but also buy-to-let landlords and the self-employed, suddenly would.
Affected pensioners would see their income tax bill by rise by a staggering 6p in the pound.
Millions of pensioners are already being dragged into higher income tax bands by the freeze on thresholds, which will run to at least 2028.
And from 2027, any retiree who gets the full new state pension will pay income tax on it, as it exceeds the £12,570 personal allowance.
Many pensioner withs even the tiniest extra income is already paying tax. Under these plans, they could soon be paying NI as well, except it won’t be called that.
Of course, nothing has been decided. The Budget isn’t until November 26. But Resolution Foundation ideas have a habit of making their way into Labour policy. Reeves has already pinched its proposals on inheritance tax and capital gains tax – and never fear, the Resolution Foundation has plenty more up its sleeve.
Starmer has just hired one of its biggest names to advise him. This is no idle chatter.
Supporters say the move would only hit better-off retirees. The poorest wouldn’t pay because their income is too low.
Critics will see it as another raid on pensioners who spent decades paying in, only to be taxed again in old age.
It’s not even a new idea. Boris Johnson floated charging NI on pensioners back in 2021 before dropping it. Now it’s back on the table.
If Reeves goes for it, millions of retirees face a brand new tax bill. And if she doesn’t, the Resolution Foundation will be back with another bright idea to clobber pensioners before long.
