The Chancellor of the Exchequer, George Osborne, announced in the budget today that the age related personal allowances will be scrapped in the coming tax years. This will mean that people who reach 65 in 2013 will lose money.
Currently, those over age 65 and over age 75 are entitled to a greater tax free allowance than those that are under the age limits. However, as the personal allowances increases to an all time high level, the need for these allowances is being questioned and so the upper age groups will be brought into line and only allowed the same amount in terms of tax free earnings.
The chancellor said that he will do away with the complexity of age-related allowances for those who reach 65 on or after 6 April 2013. This effectively means that those pensioners who would reach 65 in that tax year will suffer a drop in what would have been their personal allowance. Currently the 2012/2013 age related allowances would be £10,500 for those over 65 and £10,660 for those 75 or over and so anyone reaching 65 next tax year would have expected to get at least that. But now they will only get the £9,205 standard personal allowance for all ages, which would drop their income by £259.
Anyone who is already 65, or who will reach age 65 in the next tax year will have their age-related allowance frozen at the rate of £10,500.
This is the text of the Chancellor’s speech relating to age-related allowances:
“So over time we will simplify the tax system for pensioners by doing away with the complexity of the additional age-related allowances for anyone reaching the age of 65 on or after 6th April 2013 and I will freeze the cash value of the allowance for existing pensioners until it aligns with the personal allowance.
This will protect the existing level of allowance pensioners have, while introducing a single personal allowance for all.”