Big state pension £25,140 tax threshold update as MP showdown set | Personal Finance | Finance

Retirees have been given a major update as Chancellor Rachel Reeves hopes to double the income tax threshold for state retirees. A. Petition now closed on Parliament website The number of signatures has risen to 119,206 – and officials today announced it will be debated by MPs on June 15 – meaning pressure will increase on Ms Reeves as Treasury ministers will have to set the policy.

Currently, the personal allowance stands at £12,570 before individuals become subject to income tax. Projections show that the state pension will exceed this figure by 2027, thanks to the triple lock mechanism. Ms Reeves suggested that only those receiving the full new state pension would not face any tax liability, while many others would be at risk of being dragged into paying additional tax.

The petition calls for pensioners to be assigned a separate tax code, allowing them to earn up to £25,140 tax-free. The parliamentary debate means Ms Reeves will have to defend her Treasury’s position and clarify its plans going forward. The petition proposes that pensioners should benefit from an earnings threshold of £25,140 before being subject to tax, twice the current personal allowance of £12,570.

During his second Budget, the Chancellor announced tax increases totaling £26bn across a range of sectors; this increase was described at the time as a “smorgasbord” approach designed to create additional fiscal space for spending and borrowing plans.

The measures included a decision to maintain frozen income tax thresholds, despite widespread speculation that the prime rate could rise for the first time in decades. This keeps the basic personal tax allowance at £12,570 until 2031; This is a move that could have significant consequences for state retirees.

The petition states: “Introduce new tax code for public pensioners, with the personal allowance set at twice the personal allowance. We ask the government to introduce a new tax code for public pensioners, set at twice the basic threshold. If this is implemented, pensioners will have a higher tax exemption limit, but wealthier pensioners will still pay tax.”

“We think people with small private or workplace pensions are currently being taxed unfairly.

The Treasury responded to the petition after it passed 10,000 registrations. The statement said: “The State Pension is the basis of support for pensioners. The Government is committed to a fair tax system but doubling the Personal Allowance for pensioners would be untargeted and costly.

“The State Pension Pension is the foundation of support for pensioners. The Government is committed to the Triple Lock, one of the world’s most generous State Pension upgrade mechanisms, over the term of this Parliament. This will increase the basic and new State Pension by 4.8% next April, boosting retiree incomes by up to £575 a year and strengthening pension security.”

“The Personal Allowance is already the highest among G7 countries. Doubling this allowance for all retirees would be costly and untargeted, disproportionately benefiting high-income retirees.

“As announced in the budget, the government will ease the administrative burden on pensioners whose sole income is the basic or new State Pension, without any increases, so that from 2027-28 they will not have to pay small amounts of tax through Simple Assessment if the new or basic State Pension exceeds the Individual Allowance. “The government is investigating the best way to achieve this and will announce further details next year. [2026].”

When making her Budget speech in November, Ms Reeves promised that people who receive the full new state pension privately would be protected from taxation or having to fill out tax returns, but did not specify how this would be achieved. The Treasury has now announced that it will prepare a proposal in 2026.

To view the petition; Click here.