Almost 40,000 people have signed a petition calling for the tax free allowance for the state pension to be doubled
The current personal allowance is £12,570 a year(Image: Getty)
The Government has responded to calls to introduce a new tax code for state pensioners which would double their personal allowance. The change would mean they would only start paying tax after they earn more than £25,140 a year.
Doubling the personal allowance would mean that people with small private or workplace pensions would be taxed ‘more fairly’, according to a petition that has almost 40,000 signatures. Because more than 10,000 people have signed the online petition, the Government has had to respond to the calls.
It comes after Labour confirmed that anyone whose sole income is the state pension will not pay income tax when state pension payments increase above the personal allowance in the coming years. Over the past few months there have been concerns that many on the state pension will be pushed into paying income tax for the first time when rates increase.
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. The full new state pension is already very close to using up all the £12,570 tax-free allowance, and becoming subject to income tax.
Creator of the petition Timothy Hugh Mason said: “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.”
State pension payments will increase 4.8 percent next April, increasing the full new state pension to £241.30 a week, or £12,547.60 a year, just over £20 away from using up all the personal allowance.
As state pension payments increase at least 2.5 percent each year in line with the triple lock, the full new state pension was thought to certainly be taxable from April 2027. But the Chancellor has now said anyone who lives solely the State Pension will not pay tax throughout this current government.
HM Treasury replied to the petition: “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 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.
“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.
“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.”