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Why are some over 65s hammered?

Why are some over 65s hammered

Recently become aware of the Income limits that the 65 - 74 age bracket are faced with.

If your income (includes ALL income) is over the income limit (£21800), HM Revenue & Customs (HMRC) will reduce the age-related allowance (£9030) by half of the amount - £1 for every £2 - you have over that limit, until the basic rate allowance is reached. You'll always get the basic allowance (£6035), whatever the level of your income.

So if, for example, you're 66 and have an income of £22,300 - £500 over the limit - HMRC would reduce your age-related allowance by £250 to £8,780.

This amount to tax at 50%.

While some readers will no doubt wish they get, or will get, £21,800 in retirement, the question is why does the Government encourage the over 65s to work and then hammer them?
Stuart Wright

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17th Feb 2009 22:10

'Hammering', to me, would suggest that they had to pay more tax than someone under 65 would on the same salary, which is patently not the case.

Under 65 with income of £23000, less personal allowance of £6035, pays tax on £16965 at 20% = £3393.

Over 65 has income of £23000, less personal allowance of £8780, pays tax on £14220 at 20% = £2844.

Plus the over 65 won't be paying National Insurance.

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