The government has been accused of imposing a 'stealth tax' by freezing tax thresholds, with Chancellor Rachel Reeves told she cannot 'act surprised' when people question the fairness of her reforms. MPs debated a petition calling for a new tax code to double the £12,570 Personal Allowance for state pensioners, which garnered 119,206 signatures before closing on April 1.
Freeze on Personal Allowance Extended to 2031
The Civil Service Pensioners' Alliance warned that following Ms Reeves' Budget announcement that the Personal Allowance will remain frozen until April 2031, more pensioners could be drawn into paying income tax as the state pension increases. 'This includes some older people with modest workplace or private pensions who may not have expected to become liable for tax in retirement,' it added.
Conservative MP Criticises Government's Approach
Conservative MP Alison Griffiths said during a debate: 'The Government regularly tell people that they have not increased income tax rates. However, pensioners, who are a savvy bunch, can see exactly what is happening. They do not need a Treasury briefing to understand where more of their income is being taxed each year.' She added: 'The Chancellor chose to extend the freeze in the personal allowance until 2031. That was a political choice. It means that more pensioners will continue to be drawn into the tax system year after year. Ministers cannot make that decision and then act surprised when pensioners ask questions about fairness.'
Ms Griffiths highlighted uncertainty as a major concern, noting that while the Budget announced that pensioners whose sole income is the state pension should not have to deal with small tax bills through simple assessment from 2027, details remain unclear. 'Yet my constituents still do not know who will qualify, how the system will work, when the details will finally be published, or how pensioners will be protected from unexpected tax demands. These are reasonable questions, and people deserve answers.'
Liberal Democrat MP Calls Stealth Tax 'Dishonest'
Liberal Democrat MP Charlie Maynard said: 'The Liberal Democrats have been clear that we think it is both wrong and unfair that the government has implemented a stealth tax grab which will hit some of the lowest paid and most vulnerable the hardest by maintaining a freeze on income tax thresholds. This hits ordinary families, people on low incomes, and the group we're here to discuss today, pensioners.' He added that an estimated 600,000 people were dragged into paying income tax for the first time this April, with a further 580,000 pulled into the higher 40p rate. 'Ultimately, stealth tax rises are not only dishonest with voters, but they are a completely inadequate and ineffective way for the government to paper over the cracks in their economic plan.'
Conservative MP Defends Pensioners
Conservative John Lamont noted: 'A view that has evolved among some people, particularly online, is that pensioners are all wealthy... Whilst that may be true for a very small minority, it is simply not the reality for the vast majority.'
The state pension increased by 4.8% from £230.25 to £241.30 a week for the 2026/27 financial year.
Expert Warns of Growing Tax Burden on Low Incomes
Joanne Walker, Low Incomes Tax Reform Group (LITRG) Technical Officer, said after the Budget: 'Extending the personal allowance freeze to April 2031 will mean more people on lower incomes are brought into tax as earnings rise and thresholds stay put. It also means that those whose incomes are only just keeping up with inflation are paying a larger proportion of their income in tax. From April 2026, workers earning the minimum wage will start to pay some income tax on their earnings after working around just 20 hours a week.'
Treasury Defends Policy
The Treasury said in the Budget: 'The government is maintaining the income tax Personal Allowance at £12,570 and higher rate threshold at £50,270 from April 2028 to April 2031. The additional rate threshold remains at £125,140 from April 2028 to April 2031.' It added that it would ease the administrative burden for pensioners whose sole income is the basic or new State Pension so they do not have to pay small amounts of tax via Simple Assessment from 2027-28, with more detail to be set out next year.
Ms Reeves said in November that people whose only income comes from the state pension will not have to pay tax this Parliament. An HM Treasury spokesperson said: '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.'
