Healey plans to shield low-income pensioners from income tax

Chancellor John Healey will shield low-income pensioners from income tax in his first Budget on Wednesday 28 October, BBC News reported. He will do so through a new tax allowance for pensioners on low incomes.

The government had committed not to tax people whose only income is the state pension. The full flat-rate state pension, which is the same amount for everyone who qualifies in full, is expected to rise by 3.9% to £13,036.40 a year from April. Without changes, that increase would lift the pension above the personal allowance, the amount a person can earn before paying income tax. That allowance is £12,570, and a pensioner receiving the full pension would become liable for income tax.

Healey will meet the government's pledge through the new allowance for low-income pensioners, rather than by holding the pension below the threshold.

The state pension rises under the triple lock, which guarantees an annual increase of the highest of inflation, wage growth or 2.5%, Reuters has reported.

The Budget is also expected to raise questions about how the government pays for its plans. A think tank has warned that Healey will need to find £36 billion ($47.6 billion) in tax rises or welfare cuts in his first Budget. Healey has rejected calls to raise capital gains tax, the tax on profits from selling assets such as shares or property, in the October 28 Budget.