{"id":116149,"date":"2025-12-27T10:00:00","date_gmt":"2025-12-27T10:00:00","guid":{"rendered":"https:\/\/en.econostrum.info\/uk\/?p=116149"},"modified":"2025-12-27T09:36:06","modified_gmt":"2025-12-27T09:36:06","slug":"reeves-allowance-freeze-sparks-debate","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/uk\/reeves-allowance-freeze-sparks-debate\/","title":{"rendered":"Reeves\u2019 Allowance Freeze Sparks Debate: Relief Today, Risk Tomorrow for Retirees"},"content":{"rendered":"\n

This announcement follows growing concern that rising pension payments could soon exceed the tax-free personal allowance, potentially dragging thousands of pensioners into the tax system. Reeves stated that the government was \u201cworking on a solution\u201d to ensure fairness and avoid what she described as \u201cgoing after tiny amounts of money.\u201d<\/p>\n\n\n\n

Tax Exemption to Last Until the End of Current Parliament<\/strong><\/h2>\n\n\n\n

The Chancellor made the commitment after confirming that Parliament, which first met on 9 July 2024, will automatically dissolve five years later unless an early election is called. As such, the exemption will remain in place until at least July 2029<\/strong>. According to the Treasury<\/a> announcement, from April 2025 the full new state pension will increase by 4.8<\/strong> percent to \u00a312,548<\/strong>. The personal tax-free allowance threshold will remain frozen at \u00a312,570<\/strong>, creating a narrow margin between the two figures.<\/p>\n\n\n\n

Reeves clarified that pensioners <\/a>whose only income comes from the state pension will not have to complete a Self-Assessment tax form during this period. \u201cIf you just have a state pension, you don\u2019t have any other pension, we are not going to make you fill a tax return. I make that commitment for this Parliament<\/em>,\u201d she said.<\/p>\n\n\n\n

She added that while the government was seeking an immediate workaround, she could not make commitments beyond this Parliament. The Chancellor also emphasised the intention to simplify the system for pensioners <\/strong>and avoid unnecessary administrative burdens.<\/p>\n\n\n\n

Rising Pension Values and Frozen Tax Thresholds Raise Longer-Term Concerns<\/strong><\/h2>\n\n\n\n

The policy announcement comes amid warnings from industry experts about the impact of frozen income tax thresholds. According to Aegon\u2019s pensions director, Steven Cameron<\/strong>, the state pension\u2019s 4.8 percent rise, driven by the continuation of the triple lock, will bring short-term relief to retirees but could lead to unintended consequences by 2027 or 2028. Cameron explained that as the state pension gradually overtakes the personal allowance, pensioners could face new tax liabilities despite earning only a state pension income.<\/p>\n\n\n\n

\u201cThe sting in the tail,\u201d Cameron said, \u201cis that by 2027\/28, the full new state pension will exceed the personal allowance which has today been frozen until 2031<\/em>.\u201d He added that while pensioners would not need to complete tax returns, the exemption did not amount to a full tax waiver, suggesting that \u201cthe Government is to look into alternative approaches to dealing with the tax charges<\/em>.\u201d<\/p>\n\n\n\n

Similarly, Sarah Hills<\/strong>, wealth proposition director at LV, warned that freezing both the personal allowance and income tax bands until 2031 would have wide-reaching consequences. According to Hills, these measures would \u201csignificantly affect pensioners and working-age individuals alike<\/em>,\u201d with more people being pushed into higher tax brackets.<\/p>\n\n\n\n

While the Chancellor\u2019s assurance has provided short-term clarity, questions remain about what will happen beyond 2029<\/strong>, especially if pension values continue to rise faster than inflation. The Treasury is currently reviewing possible long-term solutions to manage this balance between pension growth and tax thresholds.<\/p>\n","protected":false},"excerpt":{"rendered":"

Chancellor Rachel Reeves has confirmed that state pensioners will be exempt from income tax for the duration of the current Parliament, meaning those relying solely on the state pension will not need to file tax returns or pay income tax until at least July 2029.<\/p>\n","protected":false},"author":10,"featured_media":116151,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44],"tags":[],"class_list":["post-116149","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116149","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/comments?post=116149"}],"version-history":[{"count":1,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116149\/revisions"}],"predecessor-version":[{"id":116150,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/posts\/116149\/revisions\/116150"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media\/116151"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/media?parent=116149"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/categories?post=116149"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/uk\/wp-json\/wp\/v2\/tags?post=116149"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}