The UK Government has dismissed a petition to stop income tax deductions on the State Pension. The online petition, created by Ray Crawford and signed by over 19,800 people, argues that individuals who receive both State Pension and additional workplace or private pension schemes are unfairly taxed. However, the Treasury has responded by stating that removing income tax from the State Pension would complicate the tax system, with higher earners benefiting the most. Lower-income individuals below the higher tax threshold would derive less benefit, and those earning below the Personal Allowance would not benefit at all.
The full New State Pension stands at £203.85 per week, and the Basic State Pension at £156.20. However, due to an uprating boost of 10.1% over this financial year, more older people may have to pay tax on their income. For instance, someone with a full New State Pension (after 35 years of National Insurance contributions) will receive £815.40 every four weeks, resulting in an annual income of £10,600.20. After deducting their annual Personal Allowance of £12,570, they are left with just £1,969.80.
The Treasury maintains that the Personal Allowance is set high enough to ensure that pensioners whose sole income comes from the State Pension do not pay any tax. Since 2010, the Personal Allowance has nearly doubled, exempting about 30% of individuals from income tax. The Treasury highlights that if the Personal Allowance had only increased in line with inflation, it would be £2,915 lower by 2023-24.
The Government intends to review all aspects of the tax system, and any decisions on changes will be made by the Chancellor in consideration of the wider public finances. The petition requires 100,000 signatures to be considered for debate in Parliament.
For more information, please visit the official petitions-parliament website.