Budget analysis: “Granny tax” will hit low income pensioners


Phasing out increased age-related personal allowances will be detrimental to lower-income taxpayers over 65. The Budget will see allowances removed for new pensioners from April 2013, and replaced with a single personal allowance (£9,205) for all. Allowances for those already of pension age are to be frozen.


Currently higher personal allowances are available for people aged 65 to 74 (£10,500 for 2012-13) and aged 75 and over (£10,660 for 2012-13), where their income does not exceed £25,400.


Rachel Marsdin, tax partner at Moore and Smalley, comments: “This change is a move towards universal personal allowances for all. But we’re at the stage where we’re still a long way away from this.  In the meantime, this means that many of region’s taxpayers who are  over 65, on lower incomes, will pay more tax in the future, as they will not benefit from the enhanced allowances.”


Today’s announcement means that in 2014, 4.41 million pensioners will be £83 worse off a year.  Within this group, 360,000 will lose an average of £285.


Rachel continues: “Although there are assurances that there will no cash losers as a result, elderly taxpayers will be worse off in real terms.”