Consumer champion Martin Lewis has secured a significant victory for low-income pensioners after a crucial Budget interview with Chancellor Rachel Reeves. The financial expert confirmed a major tax concession that will protect older people relying solely on the state pension.
Tax Relief for Pensioners
During a special Budget edition of The Martin Lewis Money Show on ITV, the Chancellor confirmed that the new full state pension will increase by 4.8% next April, reaching £12,548 annually. This brings it alarmingly close to the £12,570 personal allowance threshold where income tax typically begins.
There had been widespread concern that pensioners with any additional small income would be pushed over this limit, facing both tax payments and the administrative burden of completing annual tax returns.
However, under questioning from Lewis, Reeves made a firm commitment: "If you just have a state pension and you don't have any other pension we are not going to make you fill in a tax return." She explicitly added, "They won't have to pay the tax," and confirmed the government is "working on a solution so we are not going after tiny amounts of money."
Lewis welcomed this clarity, stating: "It is worth spreading the word on that." The Chancellor's pledge covers the current parliamentary term.
Controversial Changes to Cash ISAs
The interview also covered the government's controversial decision to reduce the tax-free cash ISA allowance from £20,000 to £12,000 from April 2027 for most people. The higher limit will be maintained for those aged 65 and over.
Labour argues this change will encourage savers to invest in stocks and shares ISAs instead, providing capital for UK-listed companies. However, Martin Lewis expressed strong disagreement with this approach.
"I think this is the wrong way to do it," Lewis stated. "There are other ways to encourage people to invest instead."
Chancellor Reeves defended the policy, noting that 90% of savers will still pay no tax on their savings. She highlighted concurrent changes to advice and guidance rules, working with the Financial Conduct Authority, and claimed several ISA providers have already committed to promoting investment in UK equities.
Energy Bill Reductions and Fixed Deals
The Budget special also addressed energy prices, following the Chancellor's announcement of measures expected to reduce average bills by £150 next year. This temporary cut results from removing two bill add-ons, including a discredited home insulation scheme.
While welcoming the reduction, Lewis suggested: "I would have preferred it to have come off the standard charge then everyone gets the same reduction but it is better than nothing."
He strongly advised consumers on standard tariffs to consider switching to fixed-rate deals immediately rather than waiting for next year's reduction.
Addressing concerns that those on fixed deals might miss out on the £150 saving, Energy Secretary Ed Miliband provided reassurance during his interview with Lewis. "We are determined that people feel the benefit, including those on fixed rates," Miliband stated, confirming that the government is working with suppliers to ensure the price cuts are passed on to all households.
