A MILLION pensioners won’t have to pay income tax if they just receive the state pension, Rachel Reeves has said.
The elderly had been due to pay up from 2027 after the Chancellor decided to freeze tax thresholds in her Budget for a further three years.
The state pension is due to exceed the personal allowance of £12,570 by 2027-28.
This means pensioners would have been due to pay tax on any amount above the tax band.
Speaking to MoneySavingExpert founder Martin Lewis on ITV last night, Ms Reeves said “they won’t have to pay the tax”.
She added that they won’t have to pay for the whole of this Parliament, expected to end in 2029.
Without action, there would have been a total of around ten million retirees paying the tax.
Many receive a private pension alongside the state pension.
Income tax – which is is taken off your wages before you are paid – thresholds have been frozen since 2022-23.
Workers can earn £12,570 before paying tax, then between that and £50,270 you pay 20%.
Between £50,271 to £125,140 you pay 40% and anything above £125,140 you will pay 45%.
If thresholds don’t rise with inflation, more of your pay is dragged into tax before it reaches your bank account — a squeeze known as fiscal drag.
It means about 790,000 workers will be pulled into paying the higher rate of tax, while nearly 1 million current non‑taxpayers will start paying income tax for the first time.
Labour had promised that income tax thresholds would only remain frozen until 2028 – but keeping thresholds frozen will bring in £8.3billion.
