Healey to shield one million pensioners from income tax in Budget, Times reports

Chancellor John Healey is expected to raise the tax-free allowance for low-income pensioners to £13,036 in Wednesday’s Budget, The Times reports, shielding about one million people from being dragged into income tax by the rise in the state pension.

The full new state pension is expected to rise by £489 to £13,036 next April, a 3.9 per cent increase under the triple lock, The Times reports. That would take it above the frozen £12,570 personal allowance, meaning low-income pensioners who rely on the state pension alone would otherwise face a tax bill for the first time.

To retain the principle that the state pension is not taxable, Healey is expected to raise the allowance for low-income pensioners to £13,036, matching the new pension rate, The Times reports. The allowance would then rise in line with the state pension over the rest of this Parliament, at a cost of £200 million a year by 2030. Pensioners with higher incomes, including those with private pensions, would still pay income tax.

The Times also reports that Healey has decided not to cut the tax-free pension lump sum, which remains at 25 per cent of a pension pot up to a maximum of £268,275, despite suggestions it could be reduced to £100,000. Steve Webb, a partner at pension consultancy LCP, told The Times: “This looks like being a decidedly pensioner-friendly budget.”

The plans have not yet been confirmed by the Treasury, and the exact eligibility rules have yet to be revealed. The Budget is due on Wednesday 28 October.

Sources: https://www.thetimes.com/uk/politics/article/pensioners-set-to-be-shielded-from-income-tax-in-budget-zdh9sjslc | https://www.thesun.co.uk/money/40807891/chancellor-shields-million-pensioners-tax/