Healey to set new tax allowance for low-income pensioners as State Pension tops £13,000

Mixed · 2Chancellor John Healey is expected to use his first Budget, on Wednesday 28 October, to shield pensioners on low incomes from income tax. 1 2 Centre · 1The full, flat-rate State Pension is expected to rise by 3.9% to £13,036.40 a year from April, which is above the £12,570 personal tax allowance and would make it liable for income tax if nothing changed. 1 Left · 1The Daily Mirror reports the rise as £489, taking the full new State Pension from £241.30 to £250.70 a week. The 3.9% figure matches wage growth, which is the highest of the three triple lock measures this year. 3

Left · 1The triple lock raises the State Pension each April by the highest of earnings growth (May to July), September inflation or 2.5%. 2 Centre · 1The government had already committed to not taxing people whose only income is the State Pension. The BBC says Healey will explain that the pledge will be met through a new tax allowance for low-income pensioners, and the chancellor's allies argue this spares pensioners an administrative burden just to pay a small amount of tax. 1 Left · 1According to the Mirror, citing the Times, the allowance for low-income pensioners would be raised to £13,036 and would then rise in line with the State Pension through this parliament. The Mirror says this would shield almost one million pensioners from income tax and is expected to cost taxpayers £200 million a year by the end of the decade. 3

Left · 1On BBC Breakfast, financial expert Dan Whitworth said the Treasury had confirmed overnight that the threshold would rise to £13,036 and keep pace with the State Pension until the end of this parliament, at a cost of around £200 million. The Mirror's second article says official confirmation is still to come in the Budget and that it had contacted the Treasury for comment. 2 3 Left · 1Whitworth said the change would also help people with a small new State Pension and a small private pension, provided their income is below the threshold. The Mirror adds that millions of pensioners with higher incomes will still pay income tax. 2 3 Left · 1Steve Webb of consultants LCP warned that the gap between the State Pension and the tax threshold will grow every year, making the policy hard to switch off and increasingly costly. He also warned of a possible 'cliff edge' if the extra allowance is limited to those on low incomes, leaving people with small private incomes worse off than those with none. 3

Left · 1The Mirror also reports that Healey has decided against cutting the maximum tax-free pension lump sum from £268,275 to £100,000. It adds that Prime Minister Andy Burnham has announced Labour plans to adjust the triple lock from April 2030, with the pension still rising by at least inflation or 2.5%, to help fund a National Care Service in England. 3 Centre · 1The BBC places the story among pre-Budget lobbying. The Conservatives and Reform UK have published alternative Budget proposals, including deep welfare cuts, and Treasury sources concede the Budget will not involve the scale of announcements seen in recent years. 1