Chancellor Rachel Reeves is facing mounting calls to grant pensioners a tax reprieve, with pressure set to intensify when a pivotal parliamentary debate occurs in eight days. MPs are divided over a campaign that demands doubling the UK state pension tax threshold from the current £12,570 to £25,140.
Petition Gains Momentum
A now-closed petition on the Parliament website garnered 119,206 signatures, prompting officials to schedule a debate on June 15. This will compel Treasury ministers to outline their policy stance, heaping further pressure on Ms Reeves.
Currently, the personal allowance stands at £12,570 before individuals become liable for income tax. Forecasts indicate that by 2027, the state pension will exceed this threshold due to the triple lock mechanism, potentially pulling millions more pensioners into paying tax on their income.
While Ms Reeves has indicated that those receiving only the full new state pension will not face a tax liability, many others risk being drawn into additional taxation.
Proposed Reform Details
The petition calls for a separate tax code for pensioners, allowing them to earn up to £25,140 tax-free—double the current personal allowance. It argues that pensioners with small private or workplace pensions are currently taxed unfairly.
The petition states: "Introduce new tax code for state pensioners with double the personal allowance. We want the government to introduce a new tax code for state pensioners, set at double the basic threshold. If this was implemented, pensioners would receive a higher tax-exempt limit, but wealthier pensioners would still pay tax."
Treasury Response
After the petition surpassed 10,000 signatures, the Treasury issued an official response, stating: "The State Pension is the foundation of support for pensioners. The Government is committed to a fair tax system but doubling the Personal Allowance for pensioners would be untargeted and costly."
The response highlighted the government's commitment to the Triple Lock, which will increase the basic and new State Pension by 4.8% next April, boosting pensioner incomes by up to £575 a year. It also noted that the Personal Allowance is already the highest among G7 countries.
Budget Context
During her second Budget, Ms Reeves announced tax increases totaling £26 billion across various sectors, described as a "smorgasbord" approach to create financial headroom. She opted to keep income tax thresholds frozen at £12,570 until 2031, a decision that could significantly impact state pensioners.
The Treasury added: "As announced at the Budget, the government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28, if the new or basic State Pension exceeds the Personal Allowance from that point."
During her Budget speech last November, Ms Reeves pledged that pensioners relying solely on the full new state pension would be safeguarded from taxation and the requirement to submit tax returns. The Treasury has since confirmed it will formulate detailed proposals throughout 2026.
