Key facts
- John Healey plans to raise the personal allowance for low-income pensioners to £13,036.
- The measure aims to prevent pensioners with only the state pension from paying income tax.
- An estimated one million pensioners are expected to benefit from the proposal.
- The cost of the measure is estimated at £200 million per year by 2030.
- Those with even small additional income could face a 'cliff edge' and higher tax bills.
UK Treasury officials are reportedly working to resolve a pension tax issue ahead of the Budget, with plans to raise the personal allowance for low-income pensioners. The current personal allowance is frozen at £12,570 until April 2031, while the state pension is set to increase to approximately £13,036 next April due to the triple lock. This could lead to pensioners facing an income tax bill of around £93 annually, despite having no other income. John Healey is expected to confirm the state pension increase and propose raising the personal allowance to match the state pension amount, a move estimated to cost £200 million a year by 2030 and benefit about one million pensioners. However, the measure could create a 'cliff edge' for those with even small additional taxable income.