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Jeff Prestridge argues the Chancellor should reject a Resolution Foundation proposal to raise income tax by 2p while cutting employee National Insurance by the same amount. The proposal is not confirmed Budget policy; if adopted, pensioners could pay more because they do not pay employee National Insurance.
Jeff Prestridge, writing for This Is Money, has warned that pensioners could face higher tax bills if the Chancellor adopts a Resolution Foundation proposal to raise income tax by 2p in the pound and cut employee National Insurance by the same amount. The proposal is an idea for the Budget, not a confirmed government policy; the concern is that pensioners do not pay employee National Insurance and would not benefit from the matching cut.
The Resolution Foundation says its “two up, two down” proposal could help raise money for public services and support for households while maintaining public finances. Under the plan, income tax would rise by 2p and employee National Insurance rates would fall by 2p. The column says workers could see the changes offset each other, while retirees would face the income tax increase without the National Insurance reduction.
Prestridge cites analysis by investment platform AJ Bell estimating that a person with annual retirement income of £35,000 could pay just under £450 more in tax under the proposal. That is an estimate tied to the suggested tax changes, not a forecast of an announced Budget measure. The column says a worker earning £35,000 would have no change in take-home pay under the same calculation.
The column also reports that the Resolution Foundation estimates its wider package of support would require £8 billion in tax rises, with additional revenue needed for higher defence spending. It argues that pensioners should not be singled out, and points to other tax measures due to take effect next April, including changes affecting inherited pensions, savings interest and property income. The source does not detail the individual measures or their likely costs here.
Why the proposed tax swap affects retirees
The proposal highlights how a change that may leave many employees’ take-home pay broadly unchanged could have a different effect on people whose income comes from pensions. Because pensioners do not pay employee National Insurance, a matching NI cut would not offset an income tax rise for them. The scale of any individual impact would depend on their taxable income and the final design of any policy.
The issue also matters because the column describes a wider tax burden already scheduled to change next April, while households face continued cost-of-living pressures. But the proposed 2p tax swap remains a think-tank recommendation, and the source gives no indication that the government has agreed to introduce it. Readers should distinguish between an argued-for policy and a Budget decision.
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Budget speculation and earlier pension fears
Prestridge writes that Budget rumours have so far been quieter than before the previous two Budgets overseen by Rachel Reeves. He recalls speculation ahead of those statements about reducing the amount of tax-free cash people can withdraw from pensions. According to his account, some people withdrew money amid the rumours; when the anticipated cuts did not happen, they could not reverse those decisions and some incurred large tax bills. This is the columnist’s description of the earlier episode.
The column says the only near-certain tax position reported at the time was that income tax and capital gains tax rates would not be aligned in the Budget. It attributes that account to the Financial Times, which reported that the Chancellor had rejected the idea of aligning the rates. The column adds that capital gains tax rates could still change independently: it gives current rates as 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers on relevant gains above the £3,000 annual exemption.
Prestridge also cites Wealth Club research indicating that more than a third of its high-net-worth clients were taking profits ahead of expected capital gains tax rises. That figure refers to the firm’s surveyed or observed client group, as described in the column; the source provides no survey period or broader population comparison. It does not establish that a rise will occur.
“The move “would go a long way to rebuilding confidence in our public finances.””
— The Resolution Foundation, as quoted in the column
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No pension tax changes confirmed yet
The source does not confirm whether the Chancellor will adopt the Resolution Foundation’s tax swap, raise capital gains tax, or make other changes to pension taxation. It also does not provide a Budget date, detailed policy documents, or an official government response to the proposals. The estimate of just under £450 for a person with £35,000 in retirement income is based on the suggested tax change and should not be read as a confirmed bill.
The column’s account of next April’s tax changes does not specify their precise rules or how they would affect different households. It is also unclear whether the reported client activity around capital gains tax is representative beyond Wealth Club’s high-net-worth clients.
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The Budget will settle the proposals
The next firm indication will come when the Chancellor presents the Budget and sets out any tax measures the government intends to introduce. Until then, the “two up, two down” plan and possible capital gains tax changes remain proposals or speculation, not confirmed policy. Any announcement would need to clarify rates, start dates, exemptions and how pension income would be treated.
For now, the column’s warning is an argument against shifting more of the tax burden onto retirees, rather than a report that such a change has been decided. The source does not give a timetable for further details beyond the forthcoming Budget.
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Key Questions
Has the Chancellor confirmed a tax rise for pensioners?
No. The source describes the income tax increase as a Resolution Foundation proposal, not an announced government policy.
What does “two up, two down” mean?
It is a proposed 2p rise in income tax alongside a 2p cut in employee National Insurance. The column says workers could see the changes offset, while pensioners would not receive the NI cut because they do not pay employee National Insurance.
How much more might a pensioner pay?
AJ Bell’s estimate, cited by Prestridge, puts the increase at just under £450 a year for someone with £35,000 in annual retirement income under the proposed tax swap. It is an estimate, not a confirmed charge.
Are capital gains tax rates set to rise?
The column says the Chancellor rejected aligning capital gains tax rates with income tax rates, citing a Financial Times report. It says other changes remain possible, but no rise is confirmed in the source.
When will the position become clearer?
The source points to the forthcoming Budget as the next opportunity for the government to announce tax plans. It does not specify the Budget date.
Source: rss
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