State pensions rise by at least 2.5 per cent every year, which will mean they will soon be subject to tax
Retirees living on the full new state pension would face a tax bill of at least £130 by the end of the decade if Rachel Reeves goes ahead with plans to extend a freeze on income tax thresholds.
Even if the pension rose by 2.5 per cent each year until 2029 – the lowest figure possible under the commitment – then it would hit £254.25 by April 2029, which equates to around £13,221 per year. Jon Greer, head of retirement policy at Quilter said: “This potential tax burden on pensioners would be particularly concerning following the reforms to the winter fuel allowance and the financial pressures many retirees face.
across the board. The government has time to implement this change before the personal allowance freeze starts to affect the lowest-income pensioners. This would help ensure that pensioners are not unfairly burdened by income tax on their state pension and can maintain their financial stability.”Since the election, Rachel Reeves has also removed the winter fuel allowance from most pensioners bar those on pension credit and other benefits.
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