Chancellor John Healey will introduce a new tax allowance for low-income pensioners in his first Budget on Wednesday, shielding them from income tax despite a planned rise in the state pension.
The full, flat-rate state pension is set to increase by 3.9% to £13,036.40 a year from April. This increase would push the pension above the current £12,570 personal tax allowance, making recipients liable for income tax under existing rules. The government committed previously to not taxing people whose only income is the state pension. Healey's new allowance will fulfill that pledge, according to the BBC.
Healey's allies say the measure will spare pensioners from administrative burdens of filing tax returns for small tax liabilities. The Treasury has not yet confirmed how many pensioners this policy will affect or released specific details.
The allowance announcement arrives as opposition parties present their own Budget alternatives. The Conservatives are calling for cuts to green taxes, red tape and benefits to reduce energy bills. Reform UK has unveiled 60 policy recommendations it claims will create jobs, including approval of the Rosebank oil field. Healey is understood to support that project.
Liberal Democrat Treasury spokeswoman Daisy Cooper called on the government to pursue a growth and defence partnership with the European Union, including single market membership, to reduce tax burdens. The Green Party urged Healey to fund energy bill support by ending tax relief for data centres.
Treasury sources indicated the Budget will not match the scale of tax and spending announcements from recent Labour and Conservative governments. The Budget document will be printed this evening, with Healey's speech expected to undergo fine-tuning until delivery Wednesday at lunchtime.