Healey Plans Income Tax Shield for Low-Income Pensioners in Upcoming Budget

Rachel Healey is set to introduce measures in the upcoming Budget to protect low-income pensioners from paying income tax as the state pension rises in April. Without intervention, the full flat-rate state pension, expected to increase by 4.1% to £230.25 per week, would exceed the £12,570 personal allowance, dragging thousands of retirees into the tax net for the first time. The move comes amid growing pressure on the government to address the fiscal drag that has pushed more pensioners into paying tax, with over 8.5 million people over state pension age now paying income tax—a figure that has doubled since 2010. Healey’s proposal would likely raise the personal allowance for pensioners or introduce a new tax-free threshold linked to the state pension, ensuring that those relying solely on the state pension are not penalized by inflation-linked increases. The policy is expected to cost the Treasury around £1.5 billion annually, but advocates argue it is a necessary correction to prevent pensioner poverty and maintain public trust in the tax system. The Budget, scheduled for March, will be closely watched as the government balances fiscal responsibility with growing demands to support older citizens on fixed incomes.