HM Revenue and Customs estimate that 8.5 million pensioners pay income tax, just under three quarters of all pensioners.
The Conservative manifesto included a promise to increase retirees’ personal allowance in line with the triple lock, so pensioners would “never pay tax” on the state pension. However, Sir Keir Starmer failed to match this pledge, with former chancellor Jeremy Hunt calling it Labour’s “retirement tax”.
Alice Haine, of investment platform Bestinvest, said: “The bumper boost may feel comforting for pensioners still struggling with the fallout from the cost of living crisis, but heavy shadows cast by Labour’s pledge to ditch the winter fuel payment for all but the poorest retirees may take some of the shine off the news.
“Throw in frozen tax thresholds with the full new state pension edging ever closer to surpassing the standard personal allowance of £12,570 – the point at which any income is liable for tax; the potential loss of the winter fuel allowance – and the threat that Housing Secretary Angela Rayner may abolish a council tax break for households with only a single occupant and it’s easy to see why pensioners feel under siege.”
Rachel Reeves said: “The Government is having to take tough decisions now to fix the foundations of our economy and repair the £22bn black hole in the public finances that we inherited from the previous government.
“However, we are committed to delivering on our manifesto promise and protecting the triple lock of pensions over the next five years. That is about putting more money in pensioners’ pockets each and every year, and it will mean the full new state pension will be worth around £1,700 more in 2029.”
An HM Treasury spokesman said: “Older people should be able to live with the dignity and respect they deserve, and the state pension is the foundation for this.
“We are committed to the triple lock, and pensioners whose sole income is the new state pension and who have not deferred or receive protected payments do not pay any income tax.”