State pension £25,140 tax threshold plan on brink of MP showdown | Personal Finance | Finance
Chancellor Rachel Reeves is coming under pressure to help pensioners by raising income tax thresholds (Image: Bloomberg via Getty Images)
Backing has surged for a campaign pushing Chancellor Rachel Reeves to double the income tax threshold for state pensioners. At present, the initial threshold allowing people to earn without paying tax stands at £12,570.
State pensions are projected to exceed that limit by 2027 owing to the triple lock, according to forecasts. Ms Reeves has indicated that those receiving only the full new state pension will not face tax demands – however, millions more will be pulled into paying additional tax.
The campaign advocates for pensioners to receive a separate tax code permitting them to earn £25,140 before paying tax. Should it reach 100,000 signatures, it will secure a debate in Parliament where Ms Reeves’ Treasury will be required to defend its stance and provide updates on plans. If the plan gets a debate it will put pressure on Ms Reeves before her Spring Statement, which has been confirmed for March 3.
Over just the past 14 days, it has jumped by more than 40,000 signatures, bringing the total to 90,853 , meaning on the verge of securing the debate. The proposal recommends that pensioners should be able to earn £25,140 before paying tax – double the £12,570 personal tax allowance.
The spring statement will not make an assessment of the Government’s performance against the fiscal mandate”, Ms Reeves said. Instead it “will provide an interim update on the economy and public finances”, following the budget at the end of November.
In her second budget, the Chancellor introduced £26 billion-worth of hikes across a variety of taxes, in what was described at the time as a “smorgasbord” strategy aimed at building a larger buffer for her spending and borrowing plans.
Among the measures were a freeze on income tax thresholds, which followed speculation that the headline rate of the tax could be hiked for the first time in decades. This froze the bottom rate of personal tax allowance at £12,570 until 2031 in a move whcih could hit state pensioners.
A cap on salary sacrifice schemes, such as optional higher pension contributions, and the “high-value council tax surcharge”, a so-called “mansion tax” on properties in England worth more than £2 million, were also among the rises.
The Treasury has issued a response to the tax threshold pensioners campaign, and should it gather 100,000 signatories, it will trigger a parliamentary confrontation where Treasury officials would need to outline their plans and justify the existing policy. The petition received an official response recently – shortly after Chancellor Rachel Reeves extended the threshold freeze until 2031 – which means those receiving the full new State Pension will face tax liabilities from 2027, assuming the triple lock system, guaranteeing annual increases of at least 2.5 per cent, remains intact.
The petition, accessible here, has amassed 54,304 signatures – triggering an official Treasury statement. Timothy Hugh Mason, who launched the campaign, said: “We want the government to introduce a new tax code for state pensioners, set at double the basic threshold. If this was implemented, pensioners would receive a higher tax-exempt limit, but wealthier pensioners would still pay tax.
“We think that people with small private or workplace pensions are currently being taxed unfairly.” The Treasury has confirmed that decisions regarding those only receiving the full new state pension and the £12,570 personal tax allowance will be made in 2026.
During her Budget address in November, Ms Reeves pledged that those exclusively receiving the full new state pension would be exempt from taxation or the requirement to complete tax returns, though she didn’t specify how this would be achieved. The Treasury has now revealed it will develop a plan in 2026.
In an official statement, the Government declared: “As announced at the Budget, the government will ease the administrative burden for pensioners whose sole income is the basic or new State Pension without any increments so that they do not have to pay small amounts of tax via Simple Assessment from 2027-28, if the new or basic State Pension exceeds the Personal Allowance from that point. The government is exploring the best way to achieve this and will set out more detail next year.”
Reacting to the suggestion of raising the minimum tax threshold for pensioners to £25,140, the Treasury responded: “The State Pension is the foundation of support for pensioners. The Government is committed to a fair tax system but doubling the Personal Allowance for pensioners would be untargeted and costly.”
The department further stated: “The State Pension is the foundation of support available to pensioners. The government is committed to the Triple Lock – one of the most generous State Pension uprating mechanisms in the world – for the duration of this Parliament. This will increase the basic and new State Pension by 4.8% next April, boosting pensioner incomes by up to £575 a year and strengthening retirement security.”
Officials added: “The Personal Allowance is already the highest amongst G7 countries. Doubling this allowance for all pensioners would be costly and untargeted – disproportionately benefiting higher-income pensioners.”
The triple lock mechanism is set to increase the full new State Pension from £230.25 to £241.30 per week (£12,548 per year) from next year, placing it just under the threshold.
Personal finance expert Martin Lewis has pointed out that the full new State Pension stands at £12,558 whilst the personal allowance stays frozen at £12,570 until 2031 – the amount people can earn annually before being liable for tax.
Mr Lewis has observed that from April 2026, the new state pension will sit £30 beneath the allowance. He explained: “So anyone who’s got any other form of earnings – well, you’re going to go over it if you’ve got the full new state pension, you will have to pay tax.
“But from 2027 because we know the state pension has to rise by a minimum 2.5 per cent because of the triple lock here’s a projection. The minimum it could rise because of the triple lock 2027 it’s going to be about £12,861, £300 more than the tax free allowance as that’s staying stable and it will go more and more and more.”
To view and sign up to the petition click here.








