A showdown in Parliament is looming as campaigners urge the Government to ensure older Britons will not see their pension income seized by the Treasury. A debate has been secured after a petition calling for the personal allowance to be doubled for pensioners won nearly 120,000 signatures. It comes as concern mounts that Chancellor Rachel Reeves’s decision to freeze the personal allowance at just £12,570 until April 2031 will see more pensioners forced to pay income tax.
The full rate of the new state pension is just under the personal allowance at £12,547.60 per year. Campaigners are adamant the Treasury’s refusal to uprate the allowance in line with inflation must not result in the state pension being taxed.
Caroline Abrahams of Age UK said: “There’s no end in sight to the ongoing cost of living crisis and many older people are being hit hard. At Age UK we certainly believe that no one who has only the state pension coming in should be liable for income tax. To this end we repeat our call to the Government to raise the level of the personal allowance for income tax across the board, to help everyone who is struggling on a very low income to get by.”
Dennis Reed of Silver Voices warned it is “essential that special taxation measures are introduced to protect pensioners on modest incomes from the cost of living crisis”.
He added: “Small private and occupational pensions, widows’ pensions and income-related state pension additions are all being clobbered by the taxman, despite having been paid for throughout working lives. What incentive is there to scrimp and save for retirement if a big slice is being snaffled by the Treasury?”
Morgan Vine of Independent Age said: “We regularly hear from older people who are making extreme cutbacks so their small income stretches to cover the basics. Many tell us they’re worried about the frozen tax thresholds and the impact this will have on their already-low income.”
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.”
MPs will be able to challenge a Government minister directly in the Westminster Hall debate scheduled for June 15.
The Treasury insists work is “already underway” to ensure a system to prevent people who rely solely on these state pension will not pay income tax and details will be set out “in due course”.