A campaigner has made a recommendation to the Chancellor to spare older people from paying tax on their state pension.
Rachel Reeves (Image: Getty)
Rachel Reeves should reintroduce an age-related personal allowance for older people to protect the state pension from tax, a campaigner has suggested.
Dennis Reed, the director of Silver Voices, accused the Chancellor of getting into a “right royal pickle” over her extension of a freeze on the lower tax threshold.
This policy means that from 2027, older people on the new state pension could find themselves paying tax on this, as it will exceed the frozen personal allowance of £12,570.
In the following years, Mr Reed warned the majority of pensioners would be sucked into the tax system and start paying tax on their triple lock increases.
He said: “I am pleased that the Chancellor has recognised the injustice of the basic state pension being taxed, but her solution is unfair and unworkable. She has got herself into a right royal pickle of her own making by refusing to discuss possible solutions with Silver Voices.
“The only way the state pension and triple lock increases can be protected from tax in the future is to reintroduce an age -related personal allowance for pensioners and uprate it each year in line with rises in the state pension”.
Silver Voices has been campaigning to expose the injustice of the basic pension being taxed after it had been paid for throughout working lives in National Insurance and tax contributions.
Public support for the campaign forced the Government to include in the Budget Red Book a policy that pensioners whose sole income is the state pension will not have to pay “small amounts of tax” if their income exceeds the personal allowance after that date.
Shortly after last week’s Budget, the Chancellor went further in a response to financial journalist Martin Lewis and confirmed later to the BBC, “that those only taking home the new state pension, will not have to pay tax in this Parliament”.
Silver Voices said: “It would clearly be unfair to exempt those on the new state pension from tax but not those on the old state pension who have additional earnings-related or other state pension entitlements which bring them up to the same level. Why should a pensioner with a small private pension which brings them to the same level of income as someone on the new state pension still have to pay tax?”
A Treasury spokesman said: “As the Chancellor has said, over this Parliament those whose only income is the basic or new State Pension without any increments will not have to pay income tax.”
