A petition calling for the State Pension to be exempt from tax has gained over 10,000 signatures – prompting a written response by the GovernmentThe current State Pension age is 66(Image: Getty Images)

The Government has responded to a petition calling for everyone on the State Pension to be exempt from paying tax. The petition says it is wrong to tax the State Pension and that it doesn’t want it to impact the tax threshold.

More than 10,000 people have now signed the petition, which wants to make “the state pension tax exempt and not impact the tax threshold,” meaning the Government is required to issue a response.

Calls for the State Pension to not be taxed comes after warnings that the number of pensioners paying tax is set to soar due to rising incomes.

New State Pension rates are predicted to exceed the Personal Allowance threshold – the income you don’t pay any tax on – by April 2027.

The Personal Allowance threshold will be frozen at £12,570 until April 2028, but the New State Pension is on track to exceed that income limit by April 2027.

HM Treasury said: “Exempting the State Pension from income tax would be expensive at a time when the Government has inherited a very challenging set of fiscal circumstances.

“Individuals earning above the higher rate threshold would benefit more than those with incomes below, and those earning below the Personal Allowance would not benefit at all.

“The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way.”

The creator of the petition, David Bresnahan said: “We want the government to make the state pension tax exempt and not impact the tax threshold. We think it is wrong to tax the state pension.”

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, warns more pensioners will be ‘dragged into taxpaying territory’ over the coming years due to frozen income thresholds.

Ms Morrissey explained: “The pension tax paying population is surging. On the one hand, this can be celebrated as a sign of rising incomes among this population, but it’s also fair to say that frozen tax thresholds have also played a huge part in dragging more pensioners into taxpaying territory. With the freeze set to stay in place until 2028, we expect to see these numbers continue to swell.

“There are things that can be done to help manage these tax liabilities. For a start, up to 25 per cent of your pension can be taken tax free and this can be used alongside taxable income to keep you below an income tax threshold. Retirement income is also more than just about pensions, with ISAs also able to play a key role.

“Paying into a pension reduces your adjusted income and this can reduce the amount of tax you have to pay or even stop you from breaching a threshold that moves you into paying tax at a higher rate.

“This can be especially helpful to those who earn between £100,000 and £125,140 per year who get hit by the stealthy 60 per cent tax trap that erodes your personal allowance.”

Under the Triple Lock policy, the New and Basic State Pensions increase each year in-line with whichever is the highest between the average annual earnings growth from May to July, CPI in the year to September, or 2.5 per cent. It is aimed at preventing the value of the State Pensions being whittled away by cost of living pressures.

The New and Basic State Pensions increased by 4.1 per cent in April, however, future forecasts from the Labour Government expect it to rise by 2.5 per cent over the next four financial years.

Using these calculations, it puts the full New State Pension on track to be worth £12,578.80 in the 2027/28 financial year – £78.80 over the Personal Allowance.

While the amount of State Pension to be taxed may seem relatively small – tax is only paid on the amount over the Personal Allowance – older people with other income streams could find themselves having to part with more cash to pay a tax bill – if it’s not automatically deducted from private or workplace pensions through PAYE.

Online guidance at GOV.UK on who might need to pay tax on their pension also includes a handy tool to calculate how much tax someone might need to pay, and the different ways this can be done.

The latest State Pension Triple Lock predictions show the following projected annual increases:

State Pension payments 2025/26

Full New State Pension

Weekly payment: £230.25Four-weekly payment: £921Annual amount: £11,973

Full Basic State Pension

Weekly payment: £176.45Four-weekly payment: £705.80Annual amount: £9,175Future new State Pension forecasts

Under a 2.5 per cent increase, the full New State Pension will be worth:

2026/27 – £236 per week, £12,227.30 a year2027/28 – £241.90 per week, £12,578.80 a yearWhat is taxed

Guidance on GOV.UK states: “You pay tax if your total annual income adds up to more than your Personal Allowance. Find out about your Personal Allowance and Income Tax rates.”

the State Pension you get – Basic or New State PensionAdditional State Pensiona private pension (workplace or personal) – you can take some of this tax-freeearnings from employment or self-employmentany taxable benefits you getany other income, such as money from investments, property or savingsCheck if you have to pay tax on your pension

Before you can check, you will need to know:

if you have a State Pension or a private pensionhow much State Pension and private pension income you will get this tax year (April 6 to April 5)the amount of any other taxable income you’ll get this tax year (for example, from employment or state benefits)

You cannot use this tool if you get:

any foreign incomeMarriage AllowanceBlind Person’s Allowance

Use this online tool at GOV.UK to check if you have to pay tax on your pension. The full guide to tax when you get a pension can be found on GOV.UK.

The petition is open until August 7 and can be found on the Government’s petitions website.