Government to Debate Doubling Personal Tax Allowance to £25,000
A significant parliamentary debate is scheduled regarding a proposal to double the HMRC Personal Tax-Free Allowance to £25,000. This development follows a petition that has garnered over 100,000 signatures, compelling the Labour Party government to address the issue in Parliament.
Petition Details and Signatures
The petition specifically urges the introduction of a new tax code for state pensioners, set at double the basic threshold. It argues that individuals with small private or workplace pensions are currently being taxed unfairly. At the time of writing, 101,146 signatures have been registered, surpassing the 100,000 threshold required for parliamentary consideration.
Rachel Reeves' Position and Spring Statement
This debate comes ahead of Labour Party Chancellor Rachel Reeves' upcoming Spring Statement next month. Ms Reeves has previously promised that people relying solely on the state pension will not have to pay income tax on it once it breaches the basic-rate tax threshold. She stated, "We are working on a solution, as we speak, to ensure that we’re not going after tiny amounts of money. In this parliament, they won’t have to pay the tax."
Expert Analysis and Concerns
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, commented that "pensioners will breathe a sigh of relief" but noted the change is currently only set to last for the duration of this parliament. Steve Webb, partner at LCP, highlighted a "clear presentation problem" for the government when the state pension breaches the threshold in 2027. He warned, "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."
State Pension Increases and Tax Implications
The new state pension is set to rise by 4.8% to £241.30 a week next April, resulting in an annual income of £12,547 for someone receiving the standard payment—just below the current personal tax allowance of £12,570. Under the triple lock, which mandates a minimum 2.5% increase, individuals could face paying tax on £292 of their payments from April 2027, amounting to a bill of approximately £58.
If implemented, the proposed doubling of the tax allowance would provide a higher tax-exempt limit for pensioners, although wealthier pensioners would still be subject to taxation. This debate underscores ongoing discussions about tax fairness and pensioner welfare in the UK.
