Almost 13 million people receive the state pension in the UK. If it does rise by 3.9%, it would take the flat-rate state pension above the personal allowance of £12,570 and therefore be liable for income tax.
The Labour government – when Rachel Reeves was chancellor – promised that pensioners who rely solely on the state pension would not be required to complete a tax return, nor be chased to pay.
However, when asked by the BBC on Tuesday, Business Secretary Jonathan Reynolds refused to confirm that pensioners reliant on the state pension will be exempted from paying income tax.
Asked by BBC Breakfast whether he could reiterate that commitment, he said: “The vast majority of people in Britain have their own private pension provision alongside the state pension so this wouldn’t be a substantial change for them, they’d already certainly be receiving an income in that case above the personal allowance.
“Any changes to personal allowances, to tax rates, take place in the Budget, that’s on October 28.”
He was repeatedly asked to confirm the previous pledge, but again pointed to the Budget.
Analysis by consultants LCP suggested that only one in 16 pensioners would benefit if the government kept to its previous pledge, saving about £91 each a year. The majority of pensioners have additional pension income and so pay income tax already.
“The government’s plans to address this point are a mess,” said Sir Steve Webb, a partner at LCP and a former Liberal Democrat pensions minister.
The ONS also published figures on the UK labour force. While the unemployment rate was unchanged at 4.9%, the number of vacancies and employees on payrolls fell in recent months.
