Tax allowance changes demanded to help state pensioners

The government is being urged to make changes to tax allowances to reduce the risk of state pensioners being taxed. Liberal Democrat MP Ben Maguire has called on Chancellor Rachel Reeves to consider the benefits of raising the tax allowance for individuals over the State Pension age to £15,000, as it is set to remain at £12,570 until 2028/29.

Failing to act would see more state pensioners dragged into paying tax, critics of the government's current plan say. That's because the state pension is worth almost as much as the tax allowance - so it would not take much to cross it and therefore have to pay tax.

Yet the government is showing no signs of changing their current plans until 2028. In a written response, Treasury Minister James Murray MP said: "The Government is committed to keeping taxes as low as possible for pensioners while ensuring fiscal responsibility, which is why it is not extending the freeze on personal tax thresholds that was implemented by the previous government, and is instead allowing them to rise with inflation from April 2028."

Furthermore, he highlighted that: "At Autumn Budget, the Government announced that the basic and new State Pension will increase by 4.1 per cent from April 2025. This means those on a full new State Pension will receive an additional £470 a year."

With the full New State Pension valued at £11,502 in the current 2024/25 tax year rising to £11,973 in 2025/26, taxpayers close to the threshold will face limited headroom before crossing into taxable income levels.

Individuals just receiving the full New State Pension won't be subject to income tax. However, older citizens with additional income from employment or private or workplace pensions may need to pay tax, reports the