The Treasury has confirmed that pensioners whose only income is their state pension will not pay income tax, under the new government led by Prime Minister Andy Burnham.
From next year, thousands of pensioners could be drawn into paying income tax for the first time, unless the freeze on the personal tax allowance is raised. However, a Treasury spokesperson confirmed that the Government is committed to ensuring anyone whose only income is the state pension will not pay income tax.
Commitment to previous pledge
This commitment, first reported by The i Paper, will see the new Chancellor, John Healey, stick to his predecessor's pledge. Former Chancellor Rachel Reeves made the pledge while in Sir Keir Starmer's government.
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 of £12,570 a year.
Triple lock impact
However, because of the state pension triple lock, which sees pensions rise by the higher of inflation, wage growth or 2.5%, the state pension will exceed the personal allowance from April, making a small amount of tax due for those receiving the benefit alone. The new Prime Minister has committed to the Labour manifesto, which says the triple lock will not be altered this Parliament.
A 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.”
Projected increase in taxpayers
The number of income taxpayers over the state pension age is projected to increase from 9.08 million in 2025-26 to 9.58 million in 2026-27. This rise is attributed to the phased increase of the state pension age from 66 to 67, along with frozen tax thresholds, which are expected to result in more pensioners paying income tax.
Additionally, HMRC forecasts that approximately 7.7 million individuals will pay the higher rate of income tax in 2026-27, an increase from 6.6 million in 2024-25. Overall, the tax authority anticipates that around 40.8 million people will pay income tax in 2026-27.
