Chancellor Rachel Reeves has confirmed that pensioners whose only source of income is the state pension will not be required to pay income tax until at least 2030.
The assurance comes as the value of the state pension is expected to rise above the frozen income tax threshold in April 2027, which would ordinarily result in some pensioners becoming taxable.
Next year, those receiving the post-2016 flat-rate state pension will get £12,547.60 just below the current £12,570 tax threshold.
With thresholds frozen and state pension payments continuing to grow, the pension is likely to exceed the tax limit within two years. Normally, HM Revenue and Customs would collect small amounts of tax through the Simple Assessment system, issuing a bill at the end of each tax year.
However, Reeves said that pensioners who rely solely on the state pension will not face this process. She reiterated in an interview with Martin Lewis of Money Saving Expert that they would be protected from tax in this Parliament.
A similar promise was made by the Conservatives in the last general election campaign.
The announcement has prompted questions about fairness. Around three-quarters of pensioners already pay income tax because they have additional income beyond the state pension. This includes 2.5 million people on the pre-2016 system who receive a basic pension plus SERPS, as well as those with even small private pensions.
Steve Webb, former pensions minister and partner at LCP, warned that the policy could create unequal treatment.
He noted that workers earning the same amount as the state pension would still be taxed. Webb also highlighted that the Budget documents contain no detailed costing, suggesting the proposal remains an early idea that may be difficult for the Treasury to implement fairly.
Rachel Vahey, head of public policy at AJ Bell, said collecting small tax sums from millions of pensioners would have been a major administrative challenge.
She added that while the government is seeking ways to simplify the process, it remains to be seen whether the final policy will genuinely reduce complexity for pensioners.
