Have your say on YouGov Labs! A panellist writes: What I think about the "Granny tax"

March 27, 2012, 11:13 AM GMT+0

In the wake of Budget 2012, PoliticsLab invited panellists with views on the content and colour of George Osborne’s plans to submit their commentary, giving their perspective on how they, or people in their position, are going to be better or worse off as a result of a certain proposal.

Roger, a 62 year-old from Stafford, writes of how the Budget's plan to increase taxes for middle-income pensioners, while phasing out the extra age-related allowance, is in his view, the wrong proposal.

(Please note this is Roger's personal opinion, and does not reflect the views of YouGov)

About Roger:

"I am a qualified accountant in practice. I act for quite a number of small businesses and complete over 200 self-assessment tax returns each year. Quite a number are for people who are in receipt of state pension together with other income."

“My comments are not specifically intended solely for me, although I will suffer from the budget measures.

"For many years as a practicing accountant I have thought just how unfair the taxation treatment of pensioners has been. If someone when becoming of a state pensionable age has no other income than the state pension, regardless of the weekly amount, they are not required to complete a self-assessment tax return.

"I have known in the past fortunate people who had very good jobs with high salaries who have been in receipt of a state pension in excess of £200 per week. Because the system dictates that tax cannot be taken from the state pension, they have not been requested to account for tax on the excess of their personal allowances.

"As soon as a pensioner is in receipt of other income – i.e. a small private pension, bank or building society interest, income from property – however small, they are required to make a declaration on a self-assessment tax return.

“Any excess of state pension over their personal allowance then becomes taxed from their other income, regardless of the level of that income. It is possible therefore that by declaring a small source of other income than the tax on a state pension, in excess of £200 per week, can in fact result in the tax being greater than the gross other income.

"The main reason for the high state pension would be due to the high earnings whilst employed, with employees and employers’ National Insurance contributions being at a very high level. These contributions have never received any tax allowance on their payment for the individual, but they have been deducted from them after tax.

“Compare this to those who abuse the system and rarely work because they can receive more from the state up to their pensionable age whilst obtaining credit towards their pension. OK, most of them will receive the basic pension when they get there – from 2014 at £140 per week – the same as those who have paid into the system all of their lives!

“On top of that, the extra income from other sources is now going to be taxed by the removal of the age related allowance.

“A more feasible and equitable system would be quite simple. Since there has been no tax relief on the payment of National Insurance contributions, there should be no tax liability on the proportion of income from the state pension. In other words, make the state pension EXEMPT from tax completely. This would at least make the phasing-out of the age-related allowance much fairer on those who have made the larger contributions over their working lives.

“It would also enable them to have other income on which like all those under the pensionable age could benefit from the normal personal allowance. The system is most unfair on those who, in their later years, have saved or been fortunate to have been able to have a private pension as opposed to those who have held their hands out to the state over the years.

“This also applies to a lot of people who have not been resident in the UK for a long time. The flood gates were opened a few years ago to all and sundry from the European countries, and they flooded in to this country because the state hand outs are so much better than in their own native countries.

“This is a reason why the unemployment figures are so high at the moment. There is little being done to reduce the weekly pay outs by the state to these people, so the best alternative is to hit the middle income pensioners and prospective pensioners because they can 'afford it'.

“Until this alliance government I was always voting Conservative. Thanks to the Cameron-Clegg regime I will not vote Conservative again. I will certainly not vote Liberal and a vote for Labour is abhorrent! I sincerely hope that there will be an independent standing in this constituency at the next election.

“This is how sad the recent taxation and social reforms have made me feel. This is not a pleasant country to live in any longer – particularly if you are on the wrong side of 60!”


Do you agree or disagree with Roger's views? What, in your view, were the positive aspects of Budget 2012, and how will they benefit you? Join in the discussion using Disqus below!