Prime Minister Andy Burnham has assured state pensioners that they will not pay income tax on the benefit, providing they don't earn money from any other means.
Personal allowance - the income you don't pay any tax on - is frozen at £12,570 until 2028, but as State Pension rates go up, more retirees are scared they will see themselves pulled into the tax net each year.
The state pension is liable to income tax, but generally pensioners whose only income is the state pension have not had to pay any. This is because the full state pension for the current financial year is £230.25 a week – which falls below the personal tax allowance.
Government commitment
A Treasury spokesperson confirmed that Mr Burnham's government plans to ensure that anyone whose only income is the state pension will not pay income tax. This decision, first reported by The i Paper, will see the new Chancellor John Healey stick to his predecessor Rachel Reeves' pledge.
Last year, Ms Reeves announced that anyone whose sole income is the State Pension will not pay income tax when their payments increase above the personal allowance.
A Treasury spokesperson said on Thursday (23 July): "Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax and we are committed to that over this Parliament. By keeping the Triple Lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest Personal Allowance in the G7."
Next steps
The Treasury added that it is already working on how to exclude those solely dependent on the State Pension from the Simple Assessment tax process, with details to be outlined in "due course".
The news comes after Mr Burnham confirmed on Thursday there is 'no commitment' from the government to increase the personal tax allowance and said 'we will look at that at the budget' in a blow to those hoping he would increase the threshold.
