A movement spearheaded by Dennis Reed is calling on Chancellor Rachel Reeves to consider raising the tax threshold for state pensions in the upcoming Spring Statement, gathering backing from 84,000 signatories on a change.org petition.
There’s growing support for the idea that the personal tax allowance’s lowest band should see an uplift from £12,570 to £20,000.
With the Spring Statement scheduled for March 26 and Ms Reeves at the helm, campaigners are hopeful for her to reveal favourable alterations.
Voicing his worries via the change.org platform, Reed has expressed deep unease regarding pensioners’ financial well-being, labelling the lack of an increase in the tax threshold as a “double whammy” alongside the Government’s decision to means-test Winter Fuel Allowance payments.
In Dennis’ own words: “Because of the frozen tax personal allowances, the top of the new state pension may breach the current personal allowance of £12,570 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.”
Dennis highlights that individuals supported by his organisation, such as 75-year-old widower Colette, are at risk of plunging into poverty if the personal allowance threshold isn’t raised.
Echoing this concern, another widower named Susan, who signed the petition shares 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.”
The freezing of the threshold in 2021 has ensnared countless low-income earners into the income tax bracket via ‘fiscal drag’. Presently, individuals earning above £12,570 face a tax rate of 20 per cent on their income, reports Lancs Live.
Petition founder Alan Frost urges the Government to take action: “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.”
Despite these arguments, the Treasury has been clear regarding its stance that it does not intend to offer any additional financial relief for workers as proposed.
A representative articulated: “The Government is committed to keeping taxes for working people as low as possible while ensuring fiscal responsibility.”
“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.”
Taxpayers are bracing themselves as tax thresholds stay fixed, with living costs on the rise. The basic rate of 20 per cent tax kicks in at £12,570, and the higher rate of 40 per cent starts at £50,270 – both thresholds have been static since 2021.