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Pensioners’ Personal Tax Allowance

Volume 748: debated on Friday 19 April 2024

The petition of residents of the constituency of Linlithgow and East Falkirk

Regrets that the Chancellor’s Spring Budget ignored the fiscal drag that pensioners are experiencing due to the policy on freezing Personal Tax allowance until April 2028; declares that this policy disproportionately affects pensioners who do not gain from cuts to National Insurance; notes this policy creates poorer pensioners who are already impacted by the cost-of-living crisis.

The petitioners therefore request that the House of Commons urge the Government to consider the soaring costs of food and energy bills for pensioners when setting the Personal Tax allowance.

And the petitioners remain, etc.—[Presented by Martyn Day, Official Report, 19 March 2024; Vol. 747, c. 904.]


Observation from the Financial Secretary to the Treasury, (Nigel Huddleston):

The Government thank the hon. Member for Linlithgow and East Falkirk (Martyn Day) for submitting the petition on behalf of his constituents regarding pensioners and the income tax personal allowance.

The Government are committed to ensuring that older people are able to live with the dignity and respect they deserve, and the state pension is the foundation of state support for older people. Thanks to the Government honouring their commitment to the triple lock, the basic and new state pensions increased by 8.5% this April, one of the largest ever cash increases in the state pension. This will support the income of over 12 million pensioners. The full rate of the new state pension is now worth £11,500 per year, while the full basic state pension is £3,700 higher, in cash terms, than in 2010. That is £990 more than if it had been uprated by prices, and £1,000 more than if it had been uprated by earnings.

The PA—the amount of income that each individual may receive before paying income tax—is currently set at a level high enough to ensure that those pensioners whose sole income is the full rate of the new state pension or basic state pension do not pay any income tax.

With respect to individuals above the state pension age who continue to work, many will pay a lower rate of tax on their income from work, as they do not pay national insurance.

The Government also provide pensioners with winter fuel payments, free eye tests, free NHS prescriptions, and free bus passes. The total support over 2022 to 2024 to help households and individuals with higher bills amounts to £96 billion—an average of £3,400 per UK household. This includes the cost of living payments in 2023-24, which helped more than 8 million UK households on eligible means-tested benefits, including pensioners receiving pension credit, 8 million pensioner households and 6 million people across the UK on eligible disability benefits.

The petitioners raise concerns about the PA being maintained at its current level until 2028. The Government have nearly doubled the PA since 2010—it is over 20% higher in real terms—ensuring some of the lowest earners do not pay income tax. Thanks to the PA, almost a quarter of individuals with taxable income will not pay income tax in 2024-25.

Due to the significant real terms increases to the PA, it is estimated there will be 1.8 million people taken out of income tax in 2024-25, compared to the threshold rising in line with inflation from 2010-11. This will include many pensioners.

The Government did make the difficult but necessary decision to maintain income tax thresholds at current levels to ensure the tax system supports strong public finances. Maintaining these thresholds is universal, progressive and fair. The highest earners will contribute more of the revenue.

As with all aspects of the tax system, the Government keep the PA under review and any decisions on future changes to the PA will be made by the Chancellor in the context of the wider public finances.