Pensioners are at a higher risk of paying tax this year (Image: Getty Images)
The government is facing calls to reform tax allowance for state pensioners. Liberal Democrat MP Ben Maguire has urged Chancellor Rachel Reeves to contemplate upping the tax allowance for individuals above age to £15,000, amid its freeze at £12,570 until 2028/29.
Such a move could stop pensioners being dragged into paying tax on their .
As of the current 2024/25 tax year, a complete New is set at £11,502, ahead of an uplift to £11,973 in 2025/26, putting taxpayers near the threshold with scanty room before tipping into the taxable income brackets. Importantly, recipients of the full New evade income tax obligations, but senior citizens drawing added even very small earnings from occupation or private or workplace pensions could face taxation, the reports.
For the majority, this tax is automatically deducted through PAYE on employment and private pensions. Those who don’t have their tax automatically deducted will receive a tax bill from the following summer, due by January of the next year.
The government is currently sticking to its plan not to change anything until 2028.
In a written reply to the call, 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.”
Additionally, he said: “At Autumn Budget, the Government announced that the basic and new will increase by 4.1 per cent from April 2025. This means those on a full new will receive an additional £470 a year.”
There’s been significant speculation about the number of pensioners who will be taxed, but currently, nearly 8 million (62%) of the UK’s 12.9 million State Pensioners already pay some tax in retirement. With auto-enrolment in workplaces now in its 13th year, more people will benefit from increased retirement income and likely pay tax, typically deducted from their private pension.
It’s crucial to understand that any tax paid in retirement is based on the amount of income earned above the threshold, not the total additional income. For instance, if someone has a total annual income of £13,000, they will pay tax on £430 – the amount above the £12,570 threshold.
The Department for Work and Pensions () will soon release the complete list of updated and benefit payments. So far, only the New and Basic rates have been confirmed, not the additional elements which are set to increase by 1.7%.
Full New
- Weekly payment: £230.25 (from £221.20)
- Four-weekly payment: £921 (from £884.80)
- Annual amount: £11,973 (from £11,502)
Full Basic
- Weekly payment: £176.45 (from £169.50)
- Four-weekly payment: £705.80 (from £678)
- Annual amount: £9,175 (from £8,814)
To check your own future payments, use the online forecasting tool on