Thousands of people across the UK have signed an online petition demanding an increase in the income tax threshold from £12,570 to £20,000. This move aims to provide financial relief to pensioners and low-income individuals, reducing their tax burden and improving their standard of living. The petition has gained significant traction, surpassing 52,900 signatures, thereby qualifying for a formal response from the UK Government.
Income Tax Threshold for Pensioners
| Key Information | Details |
|---|---|
| Current Personal Allowance | £12,570 |
| Proposed Increase | £20,000 |
| Full New State Pension (2025/26) | £11,973 per year |
| Full Basic State Pension (2025/26) | £9,175 per year |
| Government Response | No commitment to increasing the threshold |
| Petition Threshold for Debate | 100,000 signatures |
| Official Government Site | GOV.UK |
The Purpose of the Petition
The petition argues that taxing pensioners on their State Pension when it exceeds the current tax-free allowance is unfair. By increasing the personal allowance to £20,000, the proposal seeks to:
- Help low-income earners move away from reliance on benefits.
- Provide pensioners with a higher disposable income.
- Inject more money into the economy, fostering economic growth.
Government Response and Current Tax Policy
The UK Government has frozen the Personal Allowance at £12,570 until the 2028/29 financial year. Treasury Minister James Murray MP has stated that while the Labour Government aims to keep taxes as low as possible for pensioners, it remains committed to fiscal responsibility.
Parliamentary Interest
Last month, Liberal Democrat MP Ben Maguire pressed Chancellor Rachel Reeves to assess the feasibility of increasing the personal allowance for pensioners to £15,000. However, the Government did not directly address the request, focusing instead on overall tax policies.
Impact on State Pensioners
The full New State Pension for the 2024/25 tax year is set at £11,502 and will increase to £11,973 in 2025/26. Under the current tax structure, pensioners earning above the threshold due to additional income (such as private pensions or part-time employment) are subject to income tax.
Who Will Be Affected?
- Pensioners solely reliant on the State Pension will remain below the taxable income threshold.
- Those receiving additional private or workplace pensions may be taxed on earnings exceeding £12,570.
- Auto-enrolment in workplace pensions means future retirees are more likely to pay some tax.
Income Tax Rates for Pensioners
Scotland
- £12,571 to £14,876 – 19% (Starter Rate)
- £14,877 to £26,561 – 20% (Basic Rate)
- £26,562 to ¢43,662 – 21% (Intermediate Rate)
- ¢43,663 to £75,000 – 42% (Higher Rate)
England
- £12,571 to £50,270 – 20% (Basic Rate)
- £50,271 to £125,140 – 40% (Higher Rate)
- Over £125,140 – 45% (Additional Rate)
Example Tax Calculation
If a pensioner receives a total annual income of £13,000 (State Pension + private pension):
- Taxable income = £430 (£13,000 – £12,570)
- Tax payable = 19% (Scotland) or 20% (England) on £430
Proposed State Pension Payments for 2025/26
State Pension payments will rise from April 7, 2025. However, payments are made in arrears, meaning pensioners will only see the increase reflected later in the month.
Full New State Pension
- Weekly: £230.25 (up from £221.20)
- Four-weekly: £921 (up from £884.80)
- Annual: £11,973 (up from £11,502)
Full Basic State Pension
- Weekly: £176.45 (up from £169.50)
- Four-weekly: £705.80 (up from £678)
- Annual: £9,175 (up from £8,814)
Frequently Asked Questions (FAQs)
1. Will the UK Government increase the personal allowance to £20,000?
The Government has not confirmed any plans to increase the tax-free allowance, citing fiscal responsibility as a priority.
2. Who is affected by the current income tax threshold?
Pensioners with additional income from employment, private pensions, or investments exceeding £12,570 are subject to income tax.
3. How can I check my State Pension payments?
You can use the State Pension Forecasting Tool on GOV.UK to estimate your future pension payments.
4. Will State Pension payments increase in 2025?
Yes, the full New State Pension will rise to £11,973 annually, while the full Basic State Pension will increase to £9,175 annually.
5. How can I support the petition?
You can sign the petition on the official UK Parliament petitions website to help it reach 100,000 signatures for parliamentary debate.
The push to increase the income tax threshold for pensioners to £20,000 highlights growing concerns about financial security in retirement. With over 52,900 signatures, this petition has sparked national debate. However, while the UK Government acknowledges the concerns, it has not indicated any immediate plans to raise the threshold. Pensioners and low-income earners must stay informed about tax regulations and potential policy changes to manage their finances effectively.
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