The Treasury has confirmed its tax plans for pensioners whose sole income is the State Pension under new Prime Minister Andy Burnham.
The State Pension increases at the start of every financial year in line with the triple lock promise - a mechanism used to ensure the payment rates rise each year in line with whichever is higher out of inflation, earnings or 2.5%.
However, due to fiscal drag, the State Pension will be subject to tax from next April when it exceeds the personal allowance of £12,570.
Personal allowance freeze
Personal allowance - the income you don't pay any tax on - is frozen at £12,570 until 2028, but as State Pension rates go up, more retirees are scared they will see themselves pulled into the tax net each year.
Former Chancellor Rachel Reeves confirmed last year that anyone whose sole income is the State Pension will not pay income tax when their payments increase above the personal allowance.
The new Prime Minister has already committed to the Labour manifesto, which says the triple lock will not be altered this Parliament.
Treasury update
In an update issued today, the Treasury told The i Paper that Chancellor John Healey will stick to Reeve's promise that income tax will not be levied on people whose only income is their State Pension.
A 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."
The Treasury added that it is already working on how to exclude those solely dependent on the State Pension from the Simple Assessment tax process, with details to be outlined in "due course".
No commitment on threshold increase
It comes after Mr Burnham confirmed yesterday there is 'no commitment' from the government to increase the personal tax allowance and said 'we will look at that at the budget' in a blow to those hoping he would increase the threshold.
At the weekend, he said in an interview with The Times the fact the tax-free allowance had been frozen for five years was “the thing I heard the most on the doorsteps” during the Makerfield by-election campaign. The £12,570 tax free threshold has been frozen since 2021, with more people now having to pay tax as earnings have increased.
But the rumours about the threshold increasing in a tax relief that would affect millions have since been shot down, with the BBC reporting that any plans to increase the allowance was not part of Mr Burnham's initial plan to tackle the cost of living crisis.
