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The Labour government will spare people from income tax when they have no earnings beyond the state pension, Rachel Reeves has said, in a move to reduce the impact on older voters of this week’s decision to freeze thresholds.
The comments by the chancellor mean that pensioners will be exempt from the tax even when their full annual entitlement breaches the personal threshold from 2027, as long as they have no other source of income.
Labour had previously declined to match a vow by the former Conservative government during last year’s general election to avoid all tax on the state pension.
On Wednesday, Reeves delivered a Budget that raised taxes by £26bn, largely through extending a freeze on personal thresholds. The policy will drag millions of people into the tax system or higher tax brackets.
From 2027, the current state pension is for the first time expected to rise above the personal allowance threshold of £12,570.
This means pensioners whose only income is the state pension would be liable to income tax of 20 per cent on pension above that level, having to declare small amounts to the tax authorities.
Responding to a question from Martin Lewis, the consumer campaigner, Reeves confirmed that pensioners would not have to complete a self-assessment.
“If you just have a state pension, and you don’t have any other pension, we are not going to make you fill in a tax return,” the chancellor said, adding of pensioners: “In this parliament they won’t have to pay the tax.”
During last year’s campaign, the then-Conservative government said its proposals would save 8mn pensioners from paying tax.
The Treasury has been approached for comment.
