Chancellor John Healey is to announce a new tax allowance for low-income pensioners in Wednesday’s Budget, fulfilling a government pledge not to tax people whose only income is the state pension.

The full, flat-rate state pension is expected to rise by 3.9% to £13,036.40 a year from April, taking it above the £12,570 personal tax allowance.
Without a change, that would leave recipients liable for income tax.

The proposed allowance would address that clash between rising pension payments and the tax threshold.
Healey’s allies argue it would also spare pensioners the administrative burden of paying a small amount of tax.
However, the Treasury has yet to confirm the detailed arrangements or how many people would benefit, leaving the measure’s precise reach unresolved.

The announcement will form part of Healey’s first Budget, which Treasury sources acknowledge will not match the scale of tax and spending announcements made by Labour and Conservative governments in recent years.

Opposition parties have set out competing proposals, with the Conservatives and Reform UK both advocating deep welfare cuts.
The Conservatives want reductions in green taxes, regulation and benefits to help bring down energy bills.

Reform is recommending 60 policies which it claims would create jobs, including approval of the controversial Rosebank oil field.
Healey is understood to support that project.

Liberal Democrat Treasury spokeswoman Daisy Cooper has instead urged a new growth and defence partnership with the EU, including joining the single market.
She argues this would help “ease the huge tax burden weighing people down”.

The Green Party wants energy bill support funded by ending a tax relief for data centres.
Leader Zack Polanski, alongside Green MPs and peers, set out the proposals in a letter urging Healey to “make the UK affordable”.