Rachel Reeves is under pressure over pensions as support for change hit a key threshold (Image: Getty Images)
A Commons showdown over a petition urging Chancellor Rachel Reeves to double the income tax threshold for state pensioners, is still waiting for a date to be scheduled – 43 days after it crossed the threshold. Currently, the personal allowance is set at £12,570 before individuals are required to pay income tax.
Predictions indicate that by 2027, the state pension will surpass this amount due to the triple lock mechanism. A petition hosted on the Parliament website has now garnered 100,000 signatures, ensuring it will be debated in the Commons and piling increasing pressure on Ms Reeves ahead of the imminent spring statement.
While Ms Reeves has suggested that those solely receiving the full new state pension will evade tax liabilities, numerous others risk being drawn into paying more tax.
The petition demands that pensioners be given a unique tax code allowing them to earn up to £25,140 tax-free. The parliamentary debate means Ms Reeves’ Treasury will need to defend its position and provide clarity on future plans.
Signatures have surged bringing the total to 116,647, thus securing the debate with MPs and the Treasury.
The proposal recommends pensioners should benefit from a £25,140 earnings threshold before taxation is applied – double the current £12,570 personal allowance. In her second Budget, the Chancellor unveiled tax increases totalling £26 billion across multiple sectors, described at the time as a “smorgasbord” approach designed to create additional fiscal headroom for her spending and borrowing plans.
Amongst the measures was the freezing of income tax thresholds, following speculation that the main rate could rise for the first time in generations. This maintained the basic personal tax allowance at £12,570 until 2031 in a decision that may impact state pensioners.
A restriction on salary sacrifice schemes, including voluntary additional pension contributions, together with the “high-value council tax surcharge”, effectively a “mansion tax” on English properties valued above £2 million, was also included in the rises.
The Treasury has responded to the petition regarding tax thresholds for pensioners. The campaign received an official reply recently – shortly after the Chancellor extended the threshold freeze until 2031 – indicating that recipients of the full new State Pension will become subject to tax from 2027, provided the triple lock mechanism, which guarantees annual increases of at least 2.5 per cent, continues. The petition, accessible here, has gathered 101,354 signatures, prompting an official Treasury response.
Timothy Hugh Mason, the campaign’s founder, explained: “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 concerning those receiving solely the full new state pension and the £12,570 personal tax allowance will be determined in 2026.
During her Budget speech in November, Ms Reeves promised that those exclusively receiving the full new state pension would be protected from taxation or the obligation to file tax returns, though she stopped short of explaining how this would be accomplished. The Treasury has now disclosed it will formulate a plan in 2026.
In an official statement, the Government announced: “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 currently investigating the most effective method to implement this and will provide further details next year. In response to suggestions of raising the minimum tax threshold for pensioners to £25,140, the Treasury stated: “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 added: “The State Pension is the cornerstone 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, enhancing pensioner incomes by up to £575 a year and bolstering retirement security.”
Officials added: “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 formula is anticipated to elevate the full new State Pension from £230.25 to £241.30 weekly (£12,548 annually) from next year, positioning it slightly below the threshold.”
To view and sign the petition, click here.
