New Pension(er) Tax Allowance

SnowMan

Announced in the budget speech

I am delivering the new Pension Tax Allowance - so that pensioners with income up to the value of the full new state pension will not pay income tax in this Parliament.

In the budget document

6.182 Income Tax: Pension Tax Allowance – The government will introduce the Pension Tax Allowance (PTA), ensuring that pensioners whose total income is up to the value of the full new State Pension do not have the administrative burden of paying small amounts of tax. The value of the PTA is calculated by applying the basic rate of income tax (20%) to the difference between the full new State Pension and the Personal Allowance. Individuals over State Pension age [my note: or who reach State Pension age within the tax year] are eligible for the automatic tax deduction if their income, regardless of source, is below or at the value of the full new State Pension. For those with incomes just above the value of the full new State Pension, the allowance will be gradually withdrawn through a taper. The allowance will apply from 6 April 2027 until 5 April 2030 and will be uprated in line with the full new State Pension across this Parliament. It will be legislated for in Finance Bill 2026-27 and the government will consider arrangements beyond April 2030 in the usual way

And the detail in this document

https://www.gov.uk/government/publications/pension-tax-allowance-explainer

daveyjp

"This Parliament" being the important words.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82184128#Comment_82184128

Surely chancellors can only ever make meaningful commitments relating to the current parliamentary term?

Or is there any evidence that this new measure will have some sort of explicit expiry date?

LHW99

pensioners with income up to the value of the full new state pension

Does that include old state pensioners with just a small topup from SERPS or private pension?

As usual we'll need to see exactly what is formally written down.

Marcon

https://forums.moneysavingexpert.com/discussion/comment/82184141#Comment_82184141

Not just what's 'written down' - what matters is what passes into actual legislation.

Dead_keen

I thought people would be more interested in that he said that the triple lock is being made less generous. But I might have misunderstood.

SnowMan

https://www.gov.uk/government/publications/pension-tax-allowance-explainer

SnowMan

Some excerpts

This applies regardless of where your income comes from, whether that is the State Pension, a private pension, earnings from work, self-employment income, savings, property or dividend income, or a combination of these

If your total income is slightly higher than the full annual value of the new State Pension, you may still receive an income tax reduction and pay less income tax than you otherwise would. The value of your Pension Tax Allowance will gradually reduce as your income increases until it is fully withdrawn. For every £3 of income above the full level of the new State Pension, your Pension Tax Allowance will reduce by £1.

For tax years 2028-29 and 2029-30, the value of the Pension Tax Allowance will be uprated in line with the full annual value of the new State Pension

Tom receives the basic State Pension and some Additional State Pension. His total income is £10,300. As this is below the Personal Allowance (£12,570), Tom is not liable to pay income tax and therefore does not need the Pension Tax Allowance

As savings income is taxable, it counts towards your total income for the purposes of the Pension Tax Allowance. However, you will have no tax to pay on savings income as it is covered by the Starting Rate for Savings or the Personal Savings Allowance, though there may be tax to pay on other forms of income.

Income generated within an ISA is tax exempt, and does not count towards your total income.

Andy_L

https://forums.moneysavingexpert.com/discussion/comment/82184139#Comment_82184139

and presumably the hope is that by the next GE they will have worked out a more sustainable permenant soultion.

Andy_L

https://forums.moneysavingexpert.com/discussion/comment/82184158#Comment_82184158

thats not new though, it was announced at the Party Conference

mrklaw

ok its ‘for everyone’ but then has a pretty rapid taper off. going to make the maths a little fussy but at least it should be progressive so any private income over state pension shoudl be taxed roughly normally?

I’m still 12 years off so plenty of time for them to fuss with it some more