Budget to raise tax-free allowance for low-income pensioners
The upcoming Budget will lift the personal tax-free allowance to match the new state pension level, shielding about one million low-income retirees from income tax.
In the forthcoming Budget, Chancellor John Healey plans to raise the tax-free personal allowance to £13,036, aligning it with the state pension amount that takes effect next April. The adjustment is intended to exempt nearly one million pensioners who rely solely on the state pension from income tax. While low-income retirees will benefit, pensioners with additional private pensions or higher state pension entitlements will continue to pay tax.
The state pension will increase by 3.9% next year, reflecting the triple-lock mechanism that uses the highest of inflation, wage growth, or 2.5%. A separate proposal by Prime Minister Andy Burnham aims to modify the triple-lock from 2030 to fund a new National Care Service, limiting future pension growth to inflation or 2.5% and removing the wage component.
Why it matters
The change will affect tax liabilities for millions of retirees and signals the government's approach to pension funding.
How the sides frame it
LOW AGREEMENTLeft-leaning coverage frames the allowance increase as a beneficial relief for low-income pensioners and condemns prior freezes as a “stealth tax”, while centrist coverage emphasizes the proposal’s “messy” cliff-edge and potential long-term fiscal burden.
LEFT
The policy is portrayed as a positive step that will exempt nearly a million pensioners from income tax and as a correction of previous “stealth tax” freezes.
CENTER
The increase is depicted as a “messy” change that could create a cliff-edge and an ever-growing financial burden for future governments.
The left emphasises
- exempt nearly one million pensioners who rely solely on the state pension from income tax
- raise the tax-free personal allowance to £13,036
- criticises the frozen personal allowance as a “stealth tax”
How this story developed
- Oct 18 Rural councils urge Chancellor John Healey to address £19bn growth gap in upcoming Budget
- Oct 23 Antonia Medlicott’s budgeting and tax guidance has entered the discussion ahead of the Budget.
- Oct 25 Healey scheduled an early budget for 28 October that is expected to include a £70 billion borrowing increase and a mix of tax and spending measures.
In this story
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