Campaigners are calling on Rachel Reeves to raise tax-free allowances for state pensioners. With income thresholds frozen until 2028, more pensioners may face the prospect of paying tax for the first time next year.
Silver Voices, a leading pensioners’ advocacy group, demands the Chancellor must take action to prevent pensioners – especially those relying solely on the state pension – from being hit with surprise tax bills.
Currently, the personal allowance is set at £12,570. With full annual state pension rates gradually nearing this figure, Silver Voices is urging the Government to raise the allowance by £1,000 starting in April, with future increases linked to the pensions triple lock to ensure pensioners’ incomes remain protected.
Dennis Reed, director of Silver Voices, warned that without Government intervention, the basic state pension could become taxable by April 2026. He highlighted how hundreds of thousands of pensioners are pulled into the tax bracket each year due to modest savings interest or small workplace pensions, adding: “The state pension is a financial safety net, and it is being compromised.”
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Data from HM Revenue and Customs (HMRC) shows a sharp rise in the number of pensioners paying income tax, with the figure increasing by 660,000, from 7.85 million in 2023/24 to 8.51 million in 2024/25.
This trend has been ongoing since the state pension age was raised to 66 in 2020 when 6.47 million pensioners were paying tax. As pensions rise under the triple lock, more pensioners could be pushed above the frozen personal allowance threshold.
Commenting on the HMRC figures at the time of their release last year, Steve Webb, LCP partner and former pensions minister said: “A combination of frozen tax thresholds and significant increases in the state pension means the number of pensioners paying tax has continued to soar. But this is a continuation of a long-term trend which has seen the number of over 65s paying tax rise by around four million since 2010/11. For a pensioner in Britain, being an income taxpayer is now the norm rather than the exception.”
The triple lock ensures state pensions rise each year based on the highest of inflation, average wage growth, or 2.5%. Deutsche Bank forecasts that growth in average weekly earnings (AWE) will reach 5.5% by July, meaning the triple lock will likely result in a 5.5% rise in April 2026, equivalent to a £600 increase.
While this rise would help pensioners keep up with inflation, it could push their pensions above the threshold, meaning up to nine million pensioners could be forced to pay tax on their income starting in 2026.
Jan Shortt, general secretary of the National Pensioners’ Convention (NPC), warned that by 2028, only the very poorest pensioners will escape income tax. She argued: “If thresholds had kept pace with inflation, they would be over £15,000 today.”
A Government spokesperson said: “The state pension is the foundation for ensuring pensioners are able to live with the dignity and respect they deserve.
“We are committed to the triple lock, which is due to rise by 4.1% this year. Pensioners whose sole income is the new state pension and who have not deferred or received protected payments do not pay any income tax.”
