John Healey introduces tax allowance for low-income pensioners in Budget

John Healey will protect low‑income pensioners from income tax in his first Budget, to be delivered on Wednesday lunchtime. The flat‑rate state pension is set to rise 3.9% to £13,036.40 a year from April. That amount would sit above the £12,570 personal tax allowance and become taxable unless the government changes the rules. Healey says a new tax allowance for pensioners on modest incomes will meet the pledge not to tax people whose only earnings are from the state pension.

The move comes as the government faces pressure to keep the pension system fair while other parties push for deep welfare cuts. The Conservatives and Reform UK have unveiled alternative Budget plans that include significant reductions to benefits. Labour’s earlier promises to protect pensioners have already set an expectation that the state pension should not be taxed. By introducing a dedicated allowance, the chancellor aims to avoid an administrative burden on retirees who would otherwise owe only a small tax bill. The Treasury has not yet released exact figures on how many pensioners will benefit, but the policy is intended to apply to anyone whose total income remains low after the pension rise.

The Budget document will be printed later this evening, and Healey’s speech is expected to be fine‑tuned up to the last minute. Treasury insiders say the upcoming announcements will be modest compared with past Labour and Conservative budgets. Opposition parties have already voiced their positions: Liberal Democrat Treasury spokeswoman Daisy Cooper urges a new growth and defence partnership with the EU to ease tax pressures, while the Green Party calls for ending data‑centre tax relief to fund energy‑bill support and make the UK more affordable. Reform UK is pushing for 60 policies, including approval of the controversial Rosebank oil field, which Healey is understood to back. The next steps will show whether the pensioner allowance can be delivered in time for the April rollout and how it fits into the broader fiscal strategy.