A campaign that has rallied 84,000 supporters is calling on Chancellor Rachel Reeves to consider an uplift in the tax threshold for state pensions during this year's Spring Statement. Spearheaded by Dennis Reed who started a petition on change.org, there are mounting concerns due to the stagnation of the personal allowance at £12,570.
Amidst increasing demands, campaigners are insisting on a rise in the lowest personal tax allowance band from £12,570 to £20,000. The big reveal of the Spring Statement by Ms Reeves is set for March 26 and advocates for the elderly are hopeful for a favourable announcement.
Dennis Reed, on his change.org petition, expressed serious apprehensions about pensioners’ shrinking incomes and warned that a failure to raise the tax threshold will strike as a "double whammy" following the Government’s move to implement means testing for the Winter Fuel Allowance payment.
He declared: "Because of the frozen tax personal allowances, the top of the new state pension may breach the current personal allowance of £12570 in 2026. This would lead to the ludicrous situation of the state pension safety net, which has already been paid for through national insurance and tax, being taxed again. Many more pensioners across the country would be plunged into poverty as a result of political choice." For our free daily briefing on the biggest issues facing the nation, sign up to the Wales Matters newsletter here
Dennis highlighted the plight of individuals his group supports, such as 75 year old widow Colette, warning she could slide into poverty without an increase in the threshold. Another widow, Susan, who backed the campaign, shared her frustration: "I resent the fact that my husband and I paid full taxes all of our lives and yet still the pensions that we worked hard for are taxed, most unfairly, the tax taken from my state pension would help significantly towards my basic disability extras needed."
Since its fixation in 2021, the unchanged threshold has ensnared numerous lower-income individuals into paying income tax due to 'fiscal drag'. Currently, any income beyond £12,570 attracts a tax rate of 20%, reports Lancs Live.
Petition initiator, Alan Frost urges the government to: "Raise the income tax personal allowance from £12,570 to £20,000. We think this would help low earners to get off benefits and allow pensioners a decent income."
However, the Treasury has clarified that it does not have intentions to enact the kind of financial assistance proposed. A spokesperson affirmed: "The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility."
They stated: "The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility and so, at our first Budget, we decided not to extend the freeze on personal tax thresholds. The Government has no plans to increase the Personal Allowance to £20,000. Increasing the Personal Allowance to £20,000 would come at a significant fiscal cost of many billions of pounds per annum.
"This would reduce tax receipts substantially, decreasing funds available for the UK's hospitals, schools, and other essential public services that we all rely on. It would also undermine the work the Chancellor has done to restore fiscal responsibility and economic stability, which are critical to getting our economy growing and keeping taxes, inflation, and mortgages as low as possible.
"The Government keeps all taxes under review as part of the policy making process. The Chancellor will announce any changes to the tax system at fiscal events in the usual way."
As tax thresholds remain static against the backdrop of escalating living costs, taxpayers are bracing for impact. The basic rate of 20% tax kicks in at £12,570, with the higher rate of 40% starting from £50,270 in earnings – both thresholds have been held steady since 2021. To view the petition, click here.
