DWP issues statement on tax-free limit for state pensioners

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This may include adverts from us and third parties based on our knowledge of you. More info × Group 28 Thank you for subscribing! We have more newsletters Show Me No thanks, close See our Privacy Notice Questions have been raised in Parliament regarding a potential increase to the tax-free limit as the gap between the state pension and the personal allowance tax threshold narrows. Conservative MP Sir Ashley Fox asked ministers if they had considered aligning the personal allowance with the state pension.

Currently, individuals can earn up to £12,570 per year without paying income tax. Following this month's 4.1% increase, the full new state pension is £230.

25 per week, or £11,973 per year, just £600 shy of the taxable amount. Responding to the query, Treasury minister James Murray stated, "The Personal Allowance - the amount an individual can earn before paying tax - will continue to exceed the basic and full new state pension this tax year. This means pensioners whose sole income is the full new state pension or basic state pension without any increments will not pay any income tax.

" However, he highlighted an upcoming policy change, noting: "The previous Government made the decision to freeze the income tax Personal Allowance at its current level of £12,570 until April 2028. This Government is committed to keeping people's taxes as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds." During their General Election campaign last year, the Conservatives revealed plans for a so-called 'triple lock plus' policy.

This proposed mechanism would see the state pension's triple lock also applied to incrementally raise the personal allowance for pensioners each year, ensuring that the state pension remained below the income tax threshold, reports Lancs Live . The triple lock system ensures that state pension values increase by the highest of 2.5%, inflation, or average earnings growth.

Nonetheless, there has been concern from specialists that implementing tax on the state pension could have a substantial negative effect on certain pensioners, especially those who are entitled to further benefits. Rebecca Lamb, External Relations Manager at Money Wellness, issued a warning: "Many people understandably assume that a small rise in their pension is a good thing. But if it pushes them just over the personal tax allowance, it won't just mean paying a bit of income tax - it could disqualify them from Pension Credit, which in turn opens the door to a much larger loss.

" She further detailed, "Pension Credit serves as a key to numerous forms of assistance: Housing Benefit, Council Tax Reduction, free NHS dental and eye care, the Warm Home Discount, Cold Weather Payments, and even the free TV licence for over-75s. In total, someone could end up losing more than £8,000 a year in support, all because their pension creeps just above the threshold." Story Saved You can find this story in My Bookmarks.

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