In April 2025, the Labour government provided clarity on its position regarding personal tax allowance for state pensioners, following a direct inquiry in Parliament by Conservative MP Sir Ashley Fox. The question focused on whether the tax-free personal allowance would be adjusted to reflect the latest increases in state pension payments.
What Is the Current Personal Allowance?
The personal allowance for the 2025/26 tax year remains at £12,570. This is the threshold below which no income tax is due. Despite the recent 4.1% rise in state pensions, most pensioners receiving only the state pension still fall below this taxable limit.
| Category | Weekly Payment | Annual Payment | Tax Status Compared to Personal Allowance |
|---|---|---|---|
| Full New State Pension | £230.25 | £11,973 | ~£600 below threshold |
| Full Basic State Pension | £176.45 | £9,175.40 | ~£3,400 below threshold |
Labour’s Response: No Additional Freeze
Pensions Minister Torsten Bell confirmed that while the previous Conservative government had frozen the personal allowance until April 2028, Labour chose not to extend this freeze in its first budget. However, no increase in the threshold has been implemented yet.
Bell stated: “The personal allowance still exceeds both the basic and new state pension amounts. So, pensioners relying solely on these pensions won’t be liable for income tax.”
Despite this reassurance, over 80% of pensioners paid income tax during the 2022/23 tax year. This suggests many retirees have additional income sources, such as private pensions or part-time work, pushing them over the threshold.
Triple Lock Protection Remains Intact
A key reassurance from Labour is the party’s commitment to the triple lock. This mechanism ensures state pension increases are tied to the highest of three metrics:
- 2.5%
- Inflation
- Average earnings growth
In April 2025, the 4.1% increase in state pensions was based on average earnings data. This move is expected to benefit over 12 million pensioners, adding up to £1,900 per year to individual pensions and increasing government spending by approximately £31 billion.
Concerns Over Triple Lock Sustainability
Some experts warn the triple lock may become too costly to maintain. Helen Morrissey of Hargreaves Lansdown raised concerns over the system’s future:
“The state pension avoided cuts in the recent Spring Statement, but speculation continues about the triple lock’s future. Persistent uncertainty could weaken public confidence.”
She emphasized the need for a stable and transparent long-term pension strategy: “Clarifying what adequacy means and how the state pension fits into broader retirement plans is crucial.”
Long-Term Considerations
While Labour has reiterated its support for pensioners, the broader financial sustainability of current systems remains under scrutiny. The rising cost of pension commitments, coupled with the static personal allowance, may prompt future reviews. Ensuring long-term adequacy and fairness will likely require a more comprehensive pension reform strategy.
Conclusion
As of April 2025, the personal tax allowance remains unchanged at £12,570. Labour has confirmed it won’t extend the previous freeze, but has also not increased the threshold. Meanwhile, state pension payments are rising, inching closer to the taxable limit. The triple lock remains intact, offering significant annual boosts to pensions, but questions about its long-term sustainability persist. Pensioners and financial planners alike should remain attentive to future government announcements and be prepared to adjust their retirement strategies accordingly.
FAQs
Will my state pension be taxed in 2025?
If your only income is from the full new or basic state pension, you will not pay income tax, as both remain below the £12,570 allowance.
Has Labour increased the personal allowance?
No. Labour chose not to extend the freeze past 2028 but did not raise the personal allowance in their first budget.
What is the triple lock, and how does it affect pensions?
The triple lock increases pensions each April based on the highest of inflation, 2.5%, or average earnings growth. This year, it rose by 4.1%.
Will the triple lock be removed?
While there are concerns about cost, Labour has reaffirmed its commitment to maintaining the triple lock for now.
How many pensioners pay income tax?
As of the 2022/23 tax year, over 80% of pensioners had to pay income tax, typically because of additional income sources beyond the state pension.
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