Rachel Reeves is set to impose a £500-a-year retirement tax on pensioners, Conservatives warn today. A freeze on income tax thresholds means the state pension will become eligible for income tax for the first time. Even people solely dependent on the state pension with no other income will be taxed on it.
April 6 2027 is the date that the tax grab is expected to come into effect. With Rachel Reeves widely expected to extend the income tax threshold freeze, and as the triple lock ensures that the new state pension continues to increase by at least 2.5%, this is the date that the new state pension will breach the personal allowance threshold for the first time in history.
As a result, many pensioners will see the 20% basic rate of income tax applied to their pensions – with pensioners potentially paying up to £500 a year in tax 2034-35 if the threshold remains frozen each year.
And if inflation continues at the higher rate seen under this government, the bill could be up to £530 a year by 2034-35.
Fears of this Retirement Tax are also growing after Keir Starmer refused to rule out freezing the thresholds further at a recent PMQs, despite making promises on other tax measures in the same session.
Shadow Chancellor Sir Mel Stride said: “For the first time, millions of pensioners are set to pay income tax on their state pension – and Labour is silent.
“Their retirement tax plans are the latest shameful economic attack on our country’s elderly. Pensioners who have worked hard all their lives are being taxed simply for playing by the rules.”
“Labour sees pensioners not as people to protect, but as a source of revenue. We Conservatives will keep fighting them until they do what is right.”
Alex Burghart MP, Shadow Chancellor Duchy of Lancaster, said: “The Conservatives have always stood up for pensioners, which is why we are sounding the alarm. Labour must now confirm to the country that they will not extend the freeze on tax thresholds.”
A government spokesperson said: “We are committed to help our pensioners live their lives with dignity and respect, which is why in April the basic and new State Pension increased by 4.1%. Pensioners will receive a boost of up to £470 to their income in 2025/26. Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament.”