Tax threshold freeze could plunge pensioners into poverty

State Pension could be eligible for income tax by 2026, campaigners say

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A leading campaigner for older people’s rights has warned that more pensioners could be pushed into financial hardship unless the government raises the personal tax allowance for state pensioners.

Dennis Reed, director of Silver Voices, has launched a petition urging the government to:

• Increase the income tax threshold by at least £1,000 in the upcoming Spring Statement.
• Commit to future rises in line with the State Pension’s annual increase. 

So far, the petition has gained nearly 80,000 signatures.

Reed is concerned that if the tax-free personal allowance remains frozen at £12,570, the full new State Pension could exceed this threshold by 2026. “This would lead to the ludicrous situation of the State Pension safety net, which has already been paid for through national insurance and tax, being taxed again,” he said. 

He says this would be a “double whammy” for older people already struggling with rising living costs.

Three million pensioners already worried about their finances

With financial pressures mounting, many pensioners are already finding it difficult to make ends meet. According to the Express, around two million older people in the UK are struggling to get by, with another million living in precarious financial situations.

For those worried about their finances, there are some options to help ease the strain:

• Some homeowners may find that downsizing to a smaller property could free up cash. 
• Taking in a lodger can bring in extra income, with the government’s Rent a Room Scheme enabling homeowners to earn up to £7,500 per year tax-free.
• Equity release is another option, allowing homeowners aged 55+ to access some of their property wealth without having to move or sell their home.
• Having a side hustle can help bring in extra income. Try selling your handmade crafts or second-hand items through online selling sites such as Vinted, eBay and Etsy. 

Sources

Tax threshold freeze could plunge pensioners into poverty: Pensioners face poverty unless personal tax threshold raised. FT Adviser. Accessed 18 March 2025.

Around two million older people in the UK are struggling to get by: Pension poverty is harsh reality for millions being forced to toil their way out of it. The Express. Accessed 18 March 2025.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn