{"id":203176,"date":"2025-12-25T11:33:07","date_gmt":"2025-12-25T11:33:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/il\/203176\/"},"modified":"2025-12-25T11:33:07","modified_gmt":"2025-12-25T11:33:07","slug":"state-pensioners-face-two-tier-income-tax-rule-from-hmrc-next-year","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/il\/203176\/","title":{"rendered":"State pensioners face ‘two-tier’ income tax rule from HMRC next year"},"content":{"rendered":"

People deriving income solely from state pension won\u2019t be taxed – under a major rule change from the Labour Party government.<\/a> But the change from Labour – which comes due to fiscal drag – has created warnings of a two-tier system.<\/p>\n

A two-tier system has been mooted for retirees solely on new state pension and those on private schemes. The new state pension is poised to rise to \u00a3241.30 a week next April,<\/a> putting the annual income for someone receiving the standard payment at \u00a312,547 \u2013 just below the personal tax allowance of \u00a312,570 a year.<\/p>\n

The freezing of tax thresholds means that if the state pension rises by just 2.5%, from April 2027 it will fall above the threshold and someone receiving it will face paying tax on \u00a3292 of their payments \u2013 a bill of \u00a358.<\/p>\n

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But Labour has vowed to \u201cease the administrative burden for pensioners whose sole income is the basic or new state pension.”<\/p>\n

It said they would not have to \u201cpay small amounts of tax via simple assessment from 2027-28 if the new or basic state pension exceeds the personal allowance from that point\u201d.<\/p>\n

But Chancellor Rachel Reeves said that the government would not be \u201cgoing after tiny amounts of money\u201d.<\/p>\n

She was asked if they would have to pay the tax and replied: \u201cIn this parliament, they won\u2019t have to pay the tax.\u201d<\/p>\n

Steve Webb, a former pensions minister and now a partner at the consultancy LCP, said the idea of not levying income tax on one set of retirees \u201craises several questions of fairness\u201d.<\/p>\n

\u201cThe government has a clear presentation problem when the new state pension goes above the tax threshold in 2027,” the former Liberal Democrats<\/a> Pensions Minister said.<\/p>\n

“But millions of pensioners already get state pensions above the tax threshold and nothing has so far been done for them. So there is a real risk that pensioners on the new system will be more favourably treated.\u201d<\/p>\n

He said: \u201cThis penalises those who have saved, even modest amounts. And the new rules will mean that a pensioner just above the tax threshold will pay no tax whilst an employee on exactly the same income will pay both tax and national insurance contributions which seems unfair.\u201d<\/p>\n

Webb said: \u201cIt will be incredibly difficult for the Treasury to come up with something that is workable and fair.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"People deriving income solely from state pension won\u2019t be taxed – under a major rule change from the…\n","protected":false},"author":2,"featured_media":203177,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,85,40030,46,12316,5898,266,267,1003,270,50908],"class_list":{"0":"post-203176","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-il","11":"tag-income-tax","12":"tag-israel","13":"tag-pensioners","14":"tag-pensions","15":"tag-personal-finance","16":"tag-personalfinance","17":"tag-state-pension","18":"tag-tax","19":"tag-tax-threshold"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/203176","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=203176"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/203176\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/203177"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=203176"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=203176"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=203176"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}