There were fears the state pension would cross the HMRC Personal Tax-Free Allowance threshold.
HMRC set to exempt one million state pensioners from tax rule(Image: )
HMRC is set to exempt one million state pensioners from a tax rule – in major respite for retirees. After the Department for Work and Pensions ( DWP ) Triple Lock hike was announced, there were fears the state pension would cross the HMRC Personal Tax-Free Allowance threshold.
But Labour Party Chancellor Rachel Reeves later ruled this out. Now, HMRC has been quizzed over how the exemptions will work.
Cerys McDonald, director of Individuals Policy, said there are around 800,000 and a million pensioners whose only income is the state pension. She said: “We would expect this to go through the next finance bill in the Autumn but we have mobilised a project team already in anticipation of having to make this change.
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“The mitigation that we would normally use to recover this tax is simple assessment, normally we wouldn’t be processing that for 2027/2028 until after the 2028 tax year, so we’ve got a decent run in here.”
Ms McDonald told the committee: “There’s clearly a lot of detail to still work through and she [the Chancellor] has said that that detail will be set out in due course.” She said the new system will be “operable from April 2027”.
Ms Reeves said to BBC and ITV Martin Lewis previously: “And so I make that commitment for this Parliament. You’re right, 2027 looks like the time that it will cross over. We are working on a solution, as we speak, to ensure that we’re not going after tiny amounts of money.”
Mr Lewis, 52, replied: “But people will have to pay the tax. They just won’t have to do a return? Or will they not have to pay the tax?”
The Chancellor told Mr Lewis: “In this Parliament, they won’t have to pay the tax.”
The Chancellor went on, and added: “You know, further out, I’m not about to make any commitments on that. But we’re just looking at a simple workaround at the moment.”
Martin replied: “Okay. So I hadn’t actually got that from the Budget. So that’s really good to have clarity that they won’t be paying the tax.”