Campaigners are demanding Rachel Reeves axe “the old age tax trap” after 128,000 people signed a petition opposing unfair charges on pensioners. A freeze in the income tax threshold means that people who rely entirely on the state pension are likely to be taxed from 2027, while many who have a modest additional income, such as a small private pension, are already paying income tax today.
Campaign group Silver Voices last night urged its 10,000 members, and everyone who signed the petition, to write to their MP and urge them to tell the Chancellor to end the tax trap in her November 26 Budget. Director Dennis Reed said state pension recipients had already paid National Insurance. The Chancellor should increase the income tax threshold for pensioners by at least £1,000 to avoid taxing them twice, he said.
Mr Reed also called on the Chancellor to increase income tax thresholds for state pensioners in future years in line with the triple lock, which ensures pensions rise in line with inflation or average earnings.
This would reassure older voters that the government was on their side, after Labour attempted to limit winter fuel payments, refused compensation for “WASPI” women affected by the state pension age increase and axed plans to cap the cost of social care, he said.
Mr Reed said; “Labour must shed its anti-pensioner rhetoric and attitude if it has any chance of being re-elected. The winter fuel fiasco, betrayal of the WASPI women and ditching social care promises have soured relations with the older generations to such an extent that taxing the basic state pension would be the final nail in the coffin of Labour electoral optimism.
“Reeves and Starmer must start any road to recovery by taking steps in the Autumn Budget to ensure that the basic state pension will never be taxed.”
The income tax threshold has been frozen at £12,570 since 2022 and is not due to rise until 2028 – although the Chancellor yesterday refused to rule out extending the freeze further
Asked by the BBC whether she could guarantee the threshold would increase after 2028, Ms Reeves said: “I’m not going to be able to do that. We are at risk of writing a budget live on air.”
Wages including bonuses grew by 4.7% in the quarter to July, meaning state pensions are likely to rise by this amount next year. This would mean the full new state pension increases to £12,535 next year, just below the income tax threshold, and rises above the threshold in 2027.
