The UK Government has provided important details regarding the implications of the frozen personal allowance on state pensioners. This clarification comes in response to a query from Liberal Democrat MP Freddie van Mierlo, who sought to understand whether the Government had considered the impact of the personal allowance on those relying solely on their state pension.
Currently, individuals can earn up to £12,570 without incurring income tax, in line with the established personal allowance. This allowance is set to remain unchanged until April 2028. However, the new full state pension, which offers £230.25 per week or approximately £11,973 annually, is nearly at the threshold of this allowance.
The Government anticipates a rise in state pension rates of 4.8 percent in April 2024, in accordance with the triple lock policy. This adjustment will elevate the full new state pension to £241.30 per week, or around £12,547.60 annually, leaving pensioners with just over £30 of their tax-free allowance.
In his response, Dan Tomlinson, the Treasury minister, emphasized the Government’s commitment to ensuring that older citizens can enjoy a dignified retirement. He stated, “The state pension is the foundation of the support available to them,” and projected that the annual amount of the full new state pension could increase by approximately £1,900 over the course of the current Parliament, based on forecasts from the Office for Budget Responsibility.
Tomlinson addressed specific concerns regarding the personal allowance, noting that it will continue to exceed both the basic and full new state pension in the financial year 2025/26. This means that pensioners who rely solely on the full new state pension or the basic state pension, which currently stands at £176.45 per week or £9,175.40 annually, will not be subject to income tax.
For many recipients of the older basic state pension, additional payments can supplement their standard rate. State pension payments are reviewed every April under the triple lock policy, which guarantees increases according to the highest figure among inflation, average earnings growth, or 2.5 percent.
This latest clarification from the Government provides essential insights into how pensioners will be affected by the current tax structure, ensuring that those dependent on the state pension can plan for their financial futures with greater certainty.
