There has been a significant concession from the Government since the Budget on taxing the state pension, as outlined in the briefing to our members below. It is a messy situation but one from which Silver Voices can build. If you want to be involved in our further campaigning on this issue, and you are over 60, you must join Silver Voices today:  

www.silvervoices.co.uk/join-us

CHINK OF LIGHT ON TAXING THE STATE PENSION?

MEMBERS BRIEFING 53/25

Following the extension of the freeze on the lower tax threshold until 2031, in the Budget last week, the Chancellor has been responding to the Silver Voices argument that it would be morally repugnant to tax the state pension. 

In the policy ‘Red Book’ which is published after the Budget Speech, it is stated that pensioners whose sole income is the old or new state pension, without increments, will not have to pay “small amounts of tax” if their income exceeds the personal allowance from 2027. This was thought to be for the administrative convenience of both pensioners and the HMRC, and had been floated before. “Small amounts” has not been defined.   

However, following the Budget, the Chancellor went much further, declaring to the consumer expert Martin Lewis, and confirming to the BBC, “that those only taking home the new state pension, will not have to pay tax in this Parliament”. There is no mention of “small amounts” and it is clear that the commitment runs up to 2030. The proposal is not costed, and it was obviously a last-minute intervention to shore up support for the Budget.  

This statement raises more questions than answers and further details of how this commitment will be achieved are promised next year. However, it is a chink of light, which we can exploit in our ongoing campaign to get the freeze on the lower tax threshold lifted, and/or an age-related personal allowance reinstated. 

We have already pointed out, as have pension experts, that providing tax exemptions for those on the new state pension only, would be grossly unfair and practically difficult:  

• It would clearly be unfair to exempt those on the new state pension from tax, but not those on the old state pension who have additional earnings-related or other entitlements which bring them up to the same level. The Government often justifies the difference between the old and new state pension by quoting these increments! 
• Why should a pensioner with a small private pension, bringing them to the same level of income as someone on the new state pension still have to pay tax? 
• What happens if the pensioner has occasional work, do they drop in and out of the tax system? 
• Unless there is legislation, a low-income worker who is not exempt from tax, but earns the same as the new state pension, would have a strong case for discrimination  

Silver Voices will keep up the pressure for a long-term solution to prevent the state pension being taxed, as the Government now seems to have accepted the integrity and justice of our case. Although this is a messy situation, this breakthrough has only been achieved because of the high-profile campaigning by Silver Voices. The old age charities have been almost completely silent on the issue in the run-up to the Budget and have offered us no support for our petition or campaign.   

www.silvervoices.co.uk/join-us