Andy Burnham's Labour government has confirmed that state pensioners whose only income is the full state pension will not be required to pay income tax. The clarification addresses fears that frozen personal allowance thresholds could push some of the poorest over-65s into tax liability.
Tax threshold frozen as pension rises
The personal allowance – the amount you can earn before paying income tax – has remained at £12,570 for several years. Meanwhile, the triple lock guarantee ensures the state pension increases annually. The full new state pension now stands at £12,547 a year, just £23 below the tax threshold.
For pensioners with no other income, the government has confirmed that they will not face any income tax bill. However, those with modest private pensions or savings income that pushes them above £12,570 will still be liable.
Reassurance for 12 million retirees
Labour MP Marie Tidball welcomed the announcement: “Good news for pensioners across our country. The Government has confirmed that if the state pension is your only source of income, you will not pay income tax. Along with the triple lock, that means 12 million pensioners will see their income rise by up to £470 this year.”
The triple lock ensures the state pension increases by the highest of inflation, average earnings growth, or 2.5%. This year’s rise is worth up to £470 for those on the full new pension.
Private pensions still face tax
Lily Megson-Harvey, policy director at My Pension Expert, said: “The Government's commitment that people relying solely on the state pension will not pay income tax will provide welcome reassurance for retirees. For many, the state pension provides the foundation of their retirement finances, so knowing they will not unexpectedly be drawn into paying tax should help people plan with greater confidence.”
However, she added: “Those with workplace pensions or modest private savings will still be looking for clarity on how any future tax changes could affect their wider retirement income.”
Burnham hints at future changes
Prime Minister Burnham has suggested he may consider raising the personal allowance to prevent more pensioners from being dragged into tax, but has offered “no commitments”. The government’s position remains that the tax system must be balanced with fiscal responsibility.
Hundreds of thousands of pensioners with small additional incomes from private pensions or savings could still cross the threshold. The government has not announced any changes to the personal allowance for the upcoming tax year.
The confirmation comes amid wider debates about pensioner poverty and the adequacy of the state pension. Campaigners argue that while the triple lock protects the value of the state pension, frozen thresholds could erode its tax-free status for those with additional income.
