Chancellor Rachel Reeves is being pressured over tax thresholds for pensioners (Image: Bloomberg, Bloomberg via Getty Images)
A campaign pushing for crucial reforms to tax personal thresholds affecting pensioners has reached a significant milestone, potentially increasing pressure on Chancellor Rachel Reeves. A petition demanding that pensioners receive a distinct tax code to prevent them from breaching the basic income tax threshold has surged past 50,000 signatures, reaching halfway towards triggering a parliamentary debate.
The Treasury has issued a statement in response to the campaign, and should it achieve 100,000 signatures, it will force a parliamentary confrontation where treasury officials would be required to outline their proposals and justify the current policy.
The petition was given an official response recently – shortly after Chancellor Rachel Reeves extended the threshold freeze until 2031 – meaning those collecting the full new State Pension will face tax liabilities from 2027, provided the triple lock mechanism, guaranteeing annual increases of at least 2.5 per cent, continues.
The petition, accessible here, has gathered 54,304 signatures – prompting an official Treasury statement. Timothy Hugh Mason, who launched the campaign, stated: “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.
“We think that people with small private or workplace pensions are currently being taxed unfairly.”
The Treasury has confirmed that decisions regarding those solely receiving the full new state pension and the £12,570 personal tax allowance will be made in 2026.
In her Budget speech last November, Ms Reeves promised that individuals only receiving the full new state pension would be exempt from taxation or the need to file tax returns, although she did not elaborate on how this would be implemented. The Treasury has now announced it will devise a plan in 2026.
In its official statement, the Government declared: “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. The government is exploring the best way to achieve this and will set out more detail next year.”
Responding to the proposal to increase the minimum tax threshold for pensioners to £25,140, the Treasury commented: “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 department went on to say: “The State Pension is the foundation of support available to pensioners. The government is committed to the Triple Lock – one of the most generous State Pension uprating mechanisms in the world – for the duration of this Parliament. This will increase the basic and new State Pension by 4.8% next April, boosting pensioner incomes by up to £575 a year and strengthening retirement security.”
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Officials further stated: “The Personal Allowance is already the highest amongst G7 countries. Doubling this allowance for all pensioners would be costly and untargeted – disproportionately benefiting higher-income pensioners.”
The triple lock system is expected to increase the full new State Pension from £230.25 to £241.30 weekly (£12,548 annually) from next year, positioning it marginally beneath the threshold.
Personal finance expert Martin Lewis has highlighted that the complete new State Pension totals £12,558 while the personal allowance remains at £12,570 until 2031 – the sum people can earn each year before being liable for tax.
Mr Lewis has noted that the new state pension will be £30 below the allowance from April 2026. He stated: “So anyone who’s got any other form of earnings – well, you’re going to go over it if you’ve got the full new state pension, you will have to pay tax.
“But from 2027 because we know the state pension has to rise by a minimum 2.5 per cent because of the triple lock here’s a projection. The minimum it could rise because of the triple lock 2027 it’s going to be about £12,861, £300 more than the tax free allowance as that’s staying stable and it will go more and more and more.”
Forecasts showcased on the Martin Lewis Money Show Live suggest that the smallest possible increases would push new state pensions up to £12,861 in 2027, £13,183 in 2028, £13,512 in 2029 and £13,850 in 2030. He elaborated: “So you can see the issue that’s going on. My main concern was the admin. How are we going to have 90-year-olds doing self-assessment forms when they’re only earning £50 over the limit?” Mr Lewis shared his post-budget conversation with Chancellor Rachel Reeves, where he posed a question on behalf of a viewer named Rebecca: “Does my 85-year-old father who is living with dementia now have to complete a tax return as his state pension will take him over the personal allowance.”
Ms Reeves replied: “So if you just have a state pension and you don’t have any other pension you don’t have to fill in a tax return. I make that commitment for this Parliament. You’re right 2027 looks like the time it will cross over. We are working on a solution as we speak to ensure we’re not going after tiny amounts of money.”
To view and sign up to the petition click here.