A Government update has been issued after a petition was raised calling for the tax threshold for pensioners to be doubled
The Government has issued an update following demands to double the tax threshold for pensioners. Campaigners have requested a fresh tax code for retirees, granting them an increased tax-free income allowance.
Throughout the UK, State Pension beneficiaries are currently required to pay income tax should their overall income exceed their personal tax allowance. For most people, this limit remains at £12,570 per annum.
This enables people to receive £12,570 annually from their pension without being taxed. The same principle applies to the majority of working people.
However, income beyond £12,570, whether from wages or State Pension, incurs a 20 per cent tax charge on every pound above this limit. These rates rise incrementally when income or pension receipts exceed £50,270 per year.
Yet, activists have requested that this tax-free limit be doubled. In a parliamentary petition, they declared: “Introduce new tax code for state pensioners with double the personal allowance.
“We want the Government to introduce a new tax code for state pensioners, set at double the basic threshold. If this was implemented, pensioners would receive a higher tax-exempt limit, but wealthier pensioners would still pay tax.”
Presently, this petition has attracted more than 31,000 signatures, exceeding the 10,000 threshold required to trigger a Government response. If the petition garners 100,000 signatures, it could potentially be tabled for debate in the House of Commons.
However, HM Treasury has responded in writing, stating that doubling the threshold would be “costly and untargeted”.
The response read: “The State Pension is the foundation of support for pensioners. The Government is committed to a fair tax system but doubling the Personal Allowance for pensioners would be untargeted and costly.
“The State Pension is the foundation of support available to pensioners. The Government is committed to the Triple Lock – one of the most generous State Pension uprating mechanisms in the world – for the duration of this Parliament. This will increase the basic and new State Pension by 4.8 per cent next April, boosting pensioner incomes by up to £575 a year and strengthening retirement security.
“The Personal Allowance is already the highest amongst G7 countries. Doubling this allowance for all pensioners would be costly and untargeted – disproportionately benefitting higher income pensioners.”
“As announced at the Budget, the government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28, if the new or basic State Pension exceeds the Personal Allowance from that point. The Government is exploring the best way to achieve this and will set out more detail next year.”
Earlier in the year, another petition was launched advocating for the State Pension to be completely tax-free. This appeal garnered 17,129 signatures, however, HM Treasury responded stating there were “no current plans to make the State Pension tax exempt”.
