New way Labour’s coming for your pension – and it’s so shamelessly cruel says money guru JEFF PRESTRIDGE

The new tax year starts tomorrow. Is it time to celebrate? Far from it. More tears than cheers.

Savers and investors will be encouraged by the fact they can save up to £20,000, again in a lovely, tax-friendly way. Jesus Before April 5th next year, the next 12 months will bring bigger events for most of us income tax invoices.

This will result in an erosion of our household finances that most of us cannot afford – especially since it will coincide with the increase. inflation and higher bills triggered by the effects of conflict in the Middle East.

Heavier tax bills are a result of the egregious (and dishonest) tax trick called ‘fiscal drag’ enjoyed by Chancellor Rachel Reeves (yes, this was also a tactic employed by Conservative chancellors before her).

Reeves’ extension of the freeze on income tax thresholds until 2031 means more people (both working and currently retired) will be dragged into paying income tax – or higher rate tax – over the next five years.

According to money gurus investment platform This will cost basic rate taxpayers around £700 in the new tax year, rising to £3,500 for higher rate taxpayers, says AJ Bell. Sad numbers.

Five years ago the Office for Budget Responsibility (OBR) estimated that freezing income tax thresholds would bring around 1.3 million people into the income tax regime by 2026 (when the freeze is intended to be lifted).

But extending the freeze for another five years means 6 million people will be dragged into the income tax system by April 6, 2031, and the number of high-rate taxpayers will increase by 4.8 million.

No wonder the country has come to a standstill: Consumer confidence has been shattered. Workers and former workers (retirees) are being stripped of their spending power.

And it is no wonder that taxpayers are aggrieved by the fact that MPs are being given inflation-busting pay rises while their finances are plundered by a greedy Chancellor (why?) – while around 6.5 million people claiming benefits received a 6.2 per cent pay rise.

It all seems so unfair, a message many of you have conveyed to me over the past few days (keep your comments coming – I love them).

Six days ago the front page of the Daily Mail said ‘Betrayal to the strugglers’. Be careful. Readers feel betrayed by a Government that rewards the lazy by overwhelming those who try with extra layers of tax. This is so ugly.

I imagine my father, a working-class boy who succeeded through hard bribes, turning in his grave at what the Labor Party did. Sit at home and get a raise in your salary. Work and give most of your income to Reeves. Madness.

For state pension recipients, the new tax year will be met with mixed emotions.

On the one hand, those eligible for the new full state pension will see their payments rise by 4.8 per cent to £241.30 per week (£12,547.60 per year), while those reaching retirement age before 2016 will see their full rate basic state pension rise from £176.45 to £184.90 per week.

Of course, many retirees receive less than full pay. But on the other hand, this is less than the increase received by undeserving MPs and benefit claimants. And the new starting age for the state pension has been pushed back a year to 67.

Inflation, which will lead to higher energy costs and food bills in the coming months, will also cover most of this payment increase, and taxes will take an ever-larger share of the pension.

With inflation now heading towards over five per cent like an Artemis II rocket, I predict the cost of maintaining the state pension triple lock will become a major problem for Labor in the coming months – especially if the country’s finances remain in dire straits.

This could mean bad news for retirees Autumn Budget.

The lock means the state pension increases each year at the rate of the higher of inflation, average wage rises and 2.5 per cent. But this is not guaranteed and has been suspended by the Conservatives in the tax year from April 2022 after a strong bounce in earnings (8 per cent) after lockdown made the increase unaffordable.

If Labor had kept the triple lock intact, next year’s increase would likely be based on the inflation rate prevailing in September. By then, inflation could be closer to five percent, perhaps even eight percent.

If that were the case, it could result in the Chancellor following the Conservatives’ lead in suspending the triple lock and suppressing the rise for the 2027 tax year.

But Reform UK will make this difficult for Labour.

Last week, Nigel Farage’s party said it would retain the triple lock if elected to power in 2029. This was after he had previously refused to guarantee that the lock would survive. He wisely said the pledge would be funded by ‘the largest benefits interruption in history’.

My guess is that if inflation gets out of control, Reeves could do a ‘Rishi Sunak’ (Conservative Chancellor suspending the triple lock for the 2022 tax year) and temporarily take inflation out of the equation. Like Sunak, he would dress it up as a prudent move in the country’s financial interests. Conservatives may find it difficult to criticize such a decision.

Mood music regarding the longevity of the triple lock could also work in Reeves’ favor. Reform Even before the UK announced its long-term support for the triple lock, the think tank Resolution Foundation had published a paper calling for it to be scrapped.

If Labor had kept the triple lock intact, next year’s rise was likely to be driven by inflation; This rate can go up to 8 percent

Although the Çözüm Foundation is as Leftist as think tanks and has long called for the lock to be lifted, its latest argument is not entirely steeped in politics. He says Britain’s falling birth rate will result in fewer taxpayers being unable to afford state pensions for the elderly in the future.

He adds: ‘The unsustainability of the retirement triple lock will only become more acute in an increasingly aging society.’

After Farage backed the triple lock, the Institute of Economic Affairs (at the opposite end of the political spectrum from the Resolution Foundation) stepped in. He describes the triple lock as an ‘electoral bribe’ and the state pension as ‘an ill-targeted benefit paid for by working-age people, most of which goes to pensioners who are already well off’.

Instead, he argues that people should be given more opportunities to build their own savings; This is something Labor has failed to achieve on its own (even worse) by interfering with the Isas and repeatedly refusing to rule out future restrictions on the tax relief and tax-free cash available to pension savers.

In summary, I think we are moving towards a suspension of the triple lock next year and perhaps the year after that.

I could be wrong — this isn’t the first time this has happened — but Reeves’ showing no desire to deal with the mounting benefits bill will give him some much-needed financial breathing room.

In the long term, I think the triple lock is on borrowed time, despite the promise of Reform UK.

Labor is destroying this country’s economy with its brutal tax attack on UK businesses and obsession with green energy. It is deindustrializing us and destroying our farming communities.

jeff.prestridge@mailonsunday.co.uk

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