Rachel Reeves is under mounting pressure to raise the personal allowance to prevent Britain’s pensioners from being dragged into an unfair “retirement tax” trap.
Campaigners have sounded the alarm, warning that millions of retirees face paying income tax for the first time due to the Chancellor’s decision to freeze allowances.
Silver Voices, a leading pensioners’ advocacy group, has demanded urgent action to stop those relying solely on the from being hit with unexpected tax bills.
The group has called for an immediate rise in the personal allowance—currently set at £12,570—by £1,000 from April, with further increases aligned to the pensions to ensure pensioners’ incomes remain protected.
Dennis Reed, director of Silver Voices, urged the Chancellor to intervene in March’s spring spending review, warning: “Unless action is taken, the basic will become taxable from April 2026.
Campaigners have sounded the alarm (Image: Getty)
“We are calling for an immediate increase in the lower tax threshold by £1,000 and for it to be updated annually in line with the to prevent pensioners from falling into taxation.”
He told the : “This is a looming crisis for the entire pension system. Every year, hundreds of thousands of pensioners are pulled into tax because of modest savings interest or a small workplace pension. The is a financial safety net, and it is being compromised.”
New forecasts from Deutsche Bank predict the will push pensions up by 5.5%—equivalent to a £600 rise next year—and breach the frozen personal allowance. This means nine million pensioners will be forced to pay tax on their income from April 2026.
Some experts have slammed Labour’s refusal to raise tax thresholds, which were first frozen by the Conservatives in 2021, branding it “Labour’s retirement tax.” The , designed to protect pensioners’ incomes against rising costs, now risks becoming a tax trap due to Reeves’ policy of freezing personal allowances until 2029.
Jan Shortt, general secretary of the National Pensioners’ Convention (NPC), condemned the government’s stance: “The freeze on tax thresholds means that by 2028, only the very poorest pensioners will escape income tax. If thresholds had kept pace with inflation, they would be over £15,000 today.”
She added: “Taxing the shows a complete lack of respect for older generations who have worked hard and deserve financial security.”
Caroline Abrahams, charity director at Age UK, echoed the concerns, stating: “This issue will only grow in prominence as more pensioners find themselves unfairly taxed. It makes no sense for the Government to give with one hand and take away with the other.”
A government spokesman attempted to reassure pensioners, saying: “The ensures pensioners can live with dignity and respect. We are committed to the , which is due to rise by 4.1pc this year. Pensioners with only a new and no deferred or protected payments do not pay income tax.”