Saturday, March 24, 2012

Taxing Granny

I wonder whose idea it was to call it a granny tax? A brilliant political stroke, but it makes me angry.

And I speak with my anti-ageist feminist hats on. Makes us sound like poor old things who need looking after, not the active, confident beings we really are.

Why should those over 65 get a bigger personal allowance to set against income tax? We don’t pay National Insurance, have mortgages to pay, or an expensive commute to work. We also get lots of goodies paid for out of taxes – state pensions, free bus passes, free prescriptions; winter fuel allowance, reduced library fines …

The numbers of people over 65 are set to boom – the first post-war baby boomers turned 65 last year. At the same time as the numbers of 35-45 year olds – those hard-working parents - will fall because of the low birth rates of the 1970s. Do we expect them to carry the entire burden for us?

The changes for pensioners will affect only those who have at least £5,000 a year on top of the state pension and will take just 20p out of each £ of that; wealthier pensioners (those whose income is above the line at which the 40% tax rate kicks in) will pay more.

Since relatively few women in this age group will have worked long enough to earn a significant pension of their own, it is more of a granddad than a granny tax.

The changes will also mean that fewer of us have to cope with the tedious business of filling in self-assessment returns – that’s worth a bit extra in tax of anybody’s money.

All this fuss about granny’s income tax is in any case a red herring - the real damage is being done by the innocuous-sounding QE, which destroys any hope we might have had of using the interest on our nest eggs whileinflation nibbles away at their value, & makes mockery of the careful pension plans made by those retiring now, while giving those mortgage paying middle-agers an almost free ride.

And while I am on the subject of Stop Moaning – the ‘unfairness’ of the withdrawal of child benefit from higher income families with only one earner is just the price you pay for independent taxation & the right to cohabit without benefit of clergy or state certificate.

That single piece of paper was, however distasteful, a useful way of telling the taxman not to ask impertinent questions every year when deciding whether you are entitled to child benefits.



Granny tax: the official version:

1.199 The Office of Tax Simplification’s (OTS) interim report on pensioner taxation identified age-related allowances (ARAs) as a source of complexity in the tax system.21 Changes to the personal allowance made by this Government mean that the difference between existing ARAs and the personal allowance is reducing. In 2010 the difference was £3,015 and it will fall to £2,395 in 2013.

1.200 To support the goal of a single personal allowance for taxpayers regardless of age, and to spread the tax relief fairly across working age people and pensioners, from 6 April 2013 existing ARAs will be frozen at their 2012–13 levels (£10,500 for those born between 6 April 1938 and 5 April 1948, and £10,660 for those born before 6 April 1938) until they align with the personal allowance. From April 2013, ARAs will no longer be available, except to those born on or before 5 April 1948. The higher ARA will only be available to those born before 6 April 1938. These changes will simplify the system and reduce the number of pensioners in Self Assessment.

21 Review of pensioners’ taxation: Interim Report, OTS, March 2012.35 Budget 2012
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