Pensioners could see their £12,570 Personal Allowance increased by at least £1,000 under a campaign calling for action in the Autumn Budget.
The push comes as the frozen tax-free threshold risks catching more pensioners in the tax system as their State Pension rises.
One pensioner already feeling the impact is 75-year-old widow Colette, who discovered last year that her State Pension income had taken her around £1,000 over the tax-free allowance.
Colette receives part of her late husband's State Pension entitlement alongside her own.
Her small NHS pension is also being taxed. She receives just £37 a month from the pension she built up while working as a GP Practice Nurse.
216,614 people have already signed the petition.
£12,570 tax-free allowance under pressure
The Personal Allowance has been frozen at £12,570 since 2021 and is currently due to remain at that level until April 2031.
But the full new State Pension is now worth £241.30 a week, or around £12,548 a year – just £22 below the allowance.
Official earnings data showed annual wage growth of 3.9%, potentially putting the State Pension in line for an increase of nearly £500 a year from next April.
That could take the full new State Pension above £13,000 for the first time.
The final increase will not be known until September's inflation figure is published.
Government responds to pension tax warning
The Government has already acknowledged the issue created by the State Pension potentially moving above the frozen allowance.
Minister for pensions Torsten Bell has previously said: “In line with the commitment made at Budget 2025, pensioners who only just exceed the personal allowance will not have the administrative burden of paying small amounts of tax in this Parliament.
“The Chancellor will set out further details on how that commitment will be delivered at the Budget.”
The Chancellor is expected to provide further details in the Autumn Budget on October 28.
However, Silver Voices is calling for the allowance itself to be increased by at least £1,000, rather than relying on measures to reduce the administrative burden of small tax bills.
Why the State Pension is set to become taxable
The State Pension is protected by the triple lock, meaning it rises each April by whichever is highest of average earnings growth, CPI inflation or 2.5%.
The earnings figure is measured over May to July of the previous year, while the inflation test uses September's CPI figure.
With earnings currently growing faster than inflation, the earnings element could determine next April's increase.
If the 3.9% figure ultimately sets the rise, the full new State Pension would increase by nearly £500 a year and move above the £12,570 Personal Allowance.
Recommended reading:
- Full list of DWP benefits, bus passes and freebies for people of State Pension age
- Are you being paid enough? How much the average person earns at your age
- Just 1 in 16 pensioners could benefit from new State Pension tax break
Campaign calls for £1,000 increase
Silver Voices, a campaign organisation for over-60s, wants the Personal Allowance for State Pensioners increased by at least £1,000.
It also wants the threshold to rise alongside future triple-lock increases.
The campaign argues that pensioners should not see increases designed to protect their retirement income result in more tax being paid.
Share