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A This Is Money column by Jeff Prestridge argues that the Chancellor should reject a think-tank proposal to raise income tax while cutting employee National Insurance. Because pensioners do not pay National Insurance, the change could increase their tax bills, but it is a proposal, not an announced Budget policy.
Jeff Prestridge, writing for This Is Money, has urged Chancellor John Healey to reject a think-tank proposal that could raise tax bills for pensioners, arguing that a planned 2p increase in income tax paired with a 2p cut in employee National Insurance would leave many retirees paying more. The proposal is not confirmed Budget policy, and the government has not announced whether it will adopt it.
The proposal, described by the Resolution Foundation as “two up, two down,” would increase income tax by two pence in the pound while reducing employee National Insurance rates by the same amount. Employees could see the changes broadly offset one another, but pensioners do not pay National Insurance, including when they continue working after reaching state pension age. They would therefore not receive the corresponding reduction, according to the column’s account of the plan.
Prestridge cited an estimate from investment platform AJ Bell that a person with annual retirement income of £35,000 could pay just under £450 more in tax under the proposed change. The same estimate says a worker earning £35,000 in salary would have unchanged take-home pay. These are projected effects of the suggested tax switch, not figures for an announced government measure.
The column says the Resolution Foundation argues the change could help fund support for families facing the cost of living and maintain public finances. It also refers to the think-tank’s call for £8 billion in tax rises. Prestridge opposes placing any resulting burden on pensioners and says the Chancellor should leave their taxes alone.
How the Tax Swap Could Affect Retirees
The proposal matters because its effect would differ between people with similar incomes depending on whether they pay employee National Insurance. Workers could have the income tax rise offset by a reduction in National Insurance, while pensioners, who do not pay that contribution, could face the higher income tax without the matching cut. The cited £450 estimate illustrates the potential impact for one retirement-income level; it is not a forecast for every pensioner.
The debate also puts pressure on the government’s choices between funding household support, public services and higher defence spending, and limiting tax rises. Prestridge’s objection is an opinion expressed in a newspaper column. Whether the proposal is workable, who would bear its costs and whether it will appear in the Budget remain matters for the government to decide.
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Budget Speculation and Earlier Tax Changes
Prestridge says Budget speculation has so far been quieter than ahead of the previous two Budgets overseen by former Chancellor Rachel Reeves. He recalls that speculation about possible reductions to the tax-free pension lump sum led some people to withdraw money before the changes were confirmed; when the cuts did not happen, some could not reverse their decisions and incurred tax bills. This is his account and assessment of the consequences of that earlier speculation.
The column also points to tax measures due to take effect next April, including changes affecting inherited pensions, savings interest and property income. It says these were introduced under Reeves. Separately, it reports that Healey has rejected calls to align capital gains tax rates with income tax rates, citing a Financial Times report and an unnamed source. The column notes current CGT rates of 18% for basic-rate taxpayers and 24% for higher- and additional-rate taxpayers on applicable gains above the £3,000 annual exemption, while warning that rates could still change.
Another concern raised is the state pension triple lock: the column says pensioners have been told it will be removed in 2030. Prestridge also argues that taxing pensioners more could sit uneasily with Labour’s 2024 manifesto promise not to raise National Insurance, income tax or VAT. The extent to which that pledge would apply to a tax change affecting pensioners is disputed in the column, not settled by a government announcement.
““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 Tax Plan Has Been Confirmed
The government has not confirmed that it will adopt the Resolution Foundation’s “two up, two down” proposal, and the material provides no final Budget decision or timetable for any such change. It is also unclear whether Healey will announce other tax measures affecting pensioners, savings or property income. Prestridge cautions that more Budget speculation could emerge before the announcement.
The estimated effect for a £35,000 retirement income is an illustrative figure attributed to AJ Bell. The column does not provide the full calculation or explain how the result would vary with tax bands, other income or individual circumstances. No general estimate for all pensioners is supplied.
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Chancellor’s Budget Decision Ahead
The next clear milestone is the Chancellor’s Budget announcement. Until then, the proposed tax swap should be treated as an idea advanced by the Resolution Foundation, not a confirmed policy. Any Budget statement would establish whether the government intends to change income tax or employee National Insurance and what rules, rates and start dates would apply.
Readers concerned about their own tax position will need to wait for confirmed policy details before drawing conclusions from the column’s example. The source material does not give a date for the Budget or identify any further official announcement on this proposal.
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Key Questions
Has the Chancellor announced a tax rise for pensioners?
No. The source describes a think-tank proposal and Jeff Prestridge’s response to it. It does not report a confirmed Budget measure raising pensioners’ income tax.
What does “two up, two down” mean?
It refers to a proposed 2p-in-the-pound increase in income tax matched by an equivalent reduction in employee National Insurance rates. The Resolution Foundation’s proposal is not confirmed government policy.
Why could pensioners pay more under the proposal?
Pensioners do not pay National Insurance, including if they work beyond state pension age. They could face the proposed income tax rise without receiving the corresponding employee National Insurance cut, according to the column.
How much extra tax might someone with £35,000 of retirement income pay?
AJ Bell is cited as estimating that the proposed change could add just under £450 in tax for someone with £35,000 of annual retirement income. That is an estimate for the suggested policy, not a confirmed charge or a figure that applies to every pensioner.
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