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Chancellor Rachel Reeves froze tax thresholds (Image: Getty)

Rachel Reeves was told to stop treating pensioners as “an easy target”, as MPs debate calls to reverse a “ludicrous” tax hike hitting millions of older people. Parliament will consider a petition with 119,000 signatures demanding help for pensioners, following the Chancellor’s announcement that tax thresholds will be frozen until April 2031 - which means a million people who rely entirely on the state pension will be forced to pay income tax on it.

Millions more who receive a modest private or workplace pension on top of the state pension have already been dragged into paying income tax. Critics say this makes a mockery of Labour’s promise to keep the Triple Lock, a policy that ensures the state pension rises in line with inflation or average incomes. The petition to be debated calls on the Government to introduce a new tax code for state pensioners, set at double the basic threshold. It states: “Pensioners would receive a higher tax-exempt limit, but wealthier pensioners would still pay tax.”

Sally Tsoukaris, general secretary of the Civil Service Pensioners’ Alliance and a spokesperson for campaign group Later Life Ambitions, said: “Pensioners have worked hard, paid tax throughout their lives and planned for retirement on the basis that the state pension would provide some security in later life. They shouldn’t now be dragged into paying more tax by stealth.

“Freezing the personal allowance while the state pension rises means more older people are being pulled into the tax system. That includes many with only modest occupational or private pensions.”

She added: “If the Government is serious about dignity in later life, it needs to stop treating pensioners as an easy target.”

A separate petition from campaigners Silver Voices, signed by 208,000, calls for the tax threshold to be raised by £1,000 for state pensioners, and to increase in future years.

The state pension is currently £12,547 annually for those receiving the full amount, while the income tax threshold has been frozen at £12,570 since 2021. Chancellor Rachel Reeves announced in her Budget last year that the freeze will be extended until the 2030-31 financial year.

It means the state pension will become liable for income tax from next year, a process known as fiscal drag. Official Treasury watchdog the Office for Budget Responsibility has warned an additional one million people will eventually be brought into paying income tax as a result.

Silver Voices director Dennis Reed said: “This would lead to the ludicrous situation of the state pension safety net, which has already been paid for through national insurance and tax, being taxed again. Many more pensioners across the country would be plunged into poverty as a result of political choice.”

Ministers previously promised that “those whose sole income is the basic and full new State Pension” would not pay income tax, but details have not yet been published.

A Treasury spokesperson said: “Anyone whose only income is the full new or basic State Pension without any increments will not pay income tax and we are committed to that over this Parliament.

“By keeping the Triple Lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest Personal Allowance in the G7.”

The cost of enjoying a reasonable standard of living in retirement has risen according to research by Loughborough University academics, who found maintaining a “minimum retirement lifestyle” now costs £13,900 a year for a one-person household, up by £500 compared to last year, or £22,500 for a couple, up by £900. This would include housing, food and heating as well as occasional use of public transport and one holiday in the UK each year.

It means the state pension is not enough, and trade body Pensions UK warned just 82% of working-age people are saving enough into an additional pension to meet their basic needs in old age, Only 23% are on course to enjoy a “moderate” lifestyle, including luxuries such as a car and two weeks abroad each year.

Adding to the financial woes facing many pensioners, a study by campaigning charity Independent Age found just half of eligible households are claiming Council Tax Reduction in England, meaning £1.71 billion in vital support isn’t reaching those who need it. In a new report today, the charity said ensuring every eligible older person receives the benefit would take 74,000 out of poverty.

Council Tax Reduction can reduce an average bill from £2,392 down to nothing. Independent Age Chief Executive Joanna Elson said: “Both the UK Government and local authorities have a role to play in ensuring Council Tax Reduction is well publicised and reaching those that need support.”


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