Rachel Reeves Urged to Act Fast to Prevent State Pension Tax Shock
More than 100,000 people sign petition demanding state pension is not taxed.
Chancellor Rachel Reeves has been urged to act on pensions (Image: Getty)
Rachel Reeves has been urged to use her spring statement to stop pensioners being hit with tax bills. A petition by Silver Voices calling for the Chancellor to unfreeze the tax-free personal allowance for OAPs has surpassed 100,000 signatures.
The campaign group fears older people on modest incomes will be pulled into paying income tax due to triple lock increases and frozen thresholds. Director Dennis Reed said: “The Chancellor must take action to raise the lower tax threshold for older people next week, to prevent the double whammy of scrapping winter fuel payments and then taxing 20% of the triple lock increase.
“It would add insult to injury if the Chancellor was perverse enough to extend the frozen thresholds beyond 2028, as then virtually all older people would be paying tax on their pensions, and having a reduced triple lock increase every year.
“The stupendous support for our petition shows that we have the UK public on our side and the Chancellor must reintroduce age-related tax allowances.”
The group, which campaigns for over-60s, is calling for the personal allowance for pensioners to be raised by £1,000 next month, then in line with the triple lock going forward.
It has been frozen at £12,570 until 2028, but the new state pension is catching up as it is due to increase to £11,973 next month.
Under the triple lock, the state pension rises each year by whichever is highest out of 2.5%, inflation, or average earnings growth.
And the state pension could surpass the personal allowance from as early as next year if there is a triple lock boost of 5% or more in April 2026.
But if it does not exceed the threshold next year, it will the year after as the triple lock means there will be a rise of at least 2.5% in April 2026 and 2.5% in April 2027.
Frozen thresholds have already seen hundreds of thousands of older people dragged into the taxman’s net.
The number of pensioners paying income tax rose from 7.85 million in 2023/24 to 8.51 million in 2024/25, an increase of 660,000.
Prime Minister Sir Keir Starmer on Wednesday failed to repeat the Chancellor’s commitment not to extend the freeze on income tax thresholds ahead of next week’s statement.
Conservative leader Kemi Badenoch had asked him to affirm the pledge during Prime Minister’s Questions.
In the autumn budget, Ms Reeves did not extend the freeze on the thresholds at which people start to pay different rates of income tax.
Thresholds were initially frozen by the previous Conservative government until April 2028.
But the Chancellor is not expected to change taxes at next week’s spring statement.
Labour has faced an ongoing backlash for stripping most pensioners of winter fuel payments.
The Government blamed the state of the public finances for restricting the previously universal allowance to only OAPs on pension credit.
The Treasury has been contacted for comment.