The Government is reportedly considering raising the personal income tax allowance from £12,570 to £15,570, a significant financial boost for lower-income pensioners. An announcement is anticipated at the Budget in October.
Potential threshold increase
Reports indicate that Andy Burnham is considering a substantial financial uplift for lower-income pensioners. The threshold could potentially rise from its current level of £12,570 to £15,570. Such a move would allow millions of low-income households to earn more before they become liable for income tax, according to Birmingham Live, reports Nottinghamshire Live. It would also protect more pensioners from being drawn into the tax bracket.
Pressure on the Prime Minister
Since taking office as Prime Minister, Andy Burnham has faced escalating pressure to raise the personal allowance. He has confirmed that this issue will be addressed in the upcoming Budget.
The personal allowance is the amount an individual can earn before they have to pay income tax. This figure has been frozen at £12,570 since 2021.
Impact of the freeze
The extended freeze has resulted in more households becoming taxable as wages have increased in recent years. A growing number of pensioners have also been pulled into paying tax as the state pension has risen under triple lock provisions.
The full state pension is set to rise to around £13,000 from next spring. Chancellor John Healey will present his first Budget on 28th October.
Derence Lee, finance expert at Shepherds Friendly, stated: "With the personal allowance frozen at £12,570, each rise in the state pension increases the likelihood that more pensioners will be drawn into paying income tax for the first time.
"Even relatively small amounts of additional income, such as a private pension or part-time earnings, could then push them over the threshold.
"In effect, some pensioners may find that part of the future state pension increases are offset through taxation. While the triple lock remains important in protecting against rising prices, the freeze in tax thresholds means fiscal drag is likely to affect a growing number of retirees in the coming years."
