Treasury minister statement over tax allowance for state pensioners

The Government has issued a statement about how tax allowance rules impact the state pension. The update came after a question from Liberal Democrat MP Freddie van Mierlo asking if the Government had looked at the issue of the frozen personal allowance and how this would affect state pensioners.

You can currently have an income of up to £12,570 and pay no income tax, in line with the personal allowance. The personal allowance will remain at this level until April 2028.

However, the full new state pension is already close to using up all of the allowance, as it pays £230.25 a week, or £11,973 a year. State pension rates are expected to increase 4.8 percent next April thanks to the triple lock, increasing the full new state pension to £241.30 a week, or £12,547.60 a year, just over £30 away from using up all the tax-free allowance.

Responding to Mr van Mierlo, Treasury minister Dan Tomlinson said: "The Government is committed to making sure older people can live with the dignity and respect they deserve in retirement. The state pension is the foundation of the support available to them.

"Over the course of this Parliament, the yearly amount of the full new state pension is currently projected to go up by around £1,900 based on the Office for Budget Responsibility's latest forecast."

Turning to the question of the personal allowance, Mr Tomlinson said: "The personal allowance - the amount an individual can earn before paying tax - will continue to exceed the basic and full new state pension in 2025/26. 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."

The full basic state pension currently pays £176.45 a week, or £9,175.40 a year. However, many people on the older basic state pension get additional amounts on top of their basic rate.

State pension payments increase each April in line with the triple lock policy. This ensures payments go up in line with whichever is highest: inflation, the rise in average earnings or 2.5 percent.