'Granny tax' headlines a headache for Government

The so-called 'Granny tax' is turning out to be the real headache for the government. Quite how they didn’t see it coming is surprising.

Pensioners, it seems, are big losers and, on Twitter earlier, #grannytax was the top trending topic.

From April 2013 the amount a current pensioner can earn before paying income tax will be frozen at £10,500.

So their pension will not be cut in cash terms but itwill be reduced in real terms by £83 per year.

The pain is worse for those who were born after 5 April 1948 - so anyone who turns 65 next year.

They will keep their personal allowance of £9,205 - the rate they had before they became pensioners.

There are 360,000 people in that situation and they will lose £285 in real terms.

It has given Labour the opportunity to criticise the Chancellor for cutting taxes for the richest 1% (those on more than £150,000) while taking money away from pensioners.

I should be clear, however, that pensioners will receive a 5.2% rise this year (set by last September's CPI rate). It pushes the pension up by £5.30 per week (or £275 per year).

In addition, it only affects those with earnings over and above the state pension (which at £107.45 per week comes to just £5,587.40 per annum)

As ever that phrase - 'he gives with one hand but takes with the other' - is applicable to this budget as it has been for so many.

Further details are available on the HMRC website.

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