Healey to shield low-income pensioners from income tax in first Budget

State pension rise would push payments above tax threshold; chancellor plans new allowance

By LineZotpaper AI staff

Published26 October 2026

Updated26 October 2026

Read Time2 min

Chancellor John Healey will use his first Budget on Wednesday to protect low-income pensioners from income tax, according to the BBC. The full flat-rate state pension is expected to increase by 3.9% to £13,036.40 a year from April, taking it above the £12,570 personal tax allowance and making it liable for income tax unless changes are made. Healey will announce a new tax allowance for low-income pensioners to ensure they are not taxed, fulfilling a government pledge not to tax those whose only income is the state pension.

The chancellor's allies argue the new allowance spares low-income pensioners the administrative burden of paying a small amount of tax. The Budget is due to be printed on Monday evening, with Healey's speech likely to be fine-tuned up until its delivery on Wednesday lunchtime. Treasury sources concede it will not involve the scale of tax and spending announcements seen from Labour and Conservative governments in recent years.

Opposition parties have put forward their own alternative Budget proposals. The Conservatives are calling on Healey to cut green taxes, red tape and benefits to bring down energy bills. Reform UK recommends the chancellor adopt 60 policies it says will create jobs, including approving the controversial Rosebank oil field, a project Healey is understood to back.

Liberal Democrat Treasury spokeswoman Daisy Cooper has called for a new growth and defence partnership with the EU, including joining the single market, arguing it would "ease the huge tax burden weighing people down". The Green Party, led by Zack Polanski, has urged Healey to use the Budget to "make the UK affordable", including by funding energy bill support through ending a tax relief for data centres.

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Analysis

Why This Matters

Low-income pensioners would otherwise face a new tax burden as the state pension rises above the personal allowance.
The policy marks a key commitment in Healey's first Budget, offering a glimpse of Labour's fiscal priorities.
The Budget comes amid alternative proposals from opposition parties, setting up a political debate on taxation and spending.

Background

The state pension is set to increase by 3.9% in April, taking it above the £12,570 personal tax allowance. The government had already pledged not to tax those whose only income is the state pension. Healey's new tax allowance for low-income pensioners is intended to fulfil that pledge and avoid forcing pensioners to file tax returns for small amounts.

Key Perspectives

Treasury allies: argue the new allowance spares low-income pensioners the administrative burden of paying a small amount of tax. The Conservatives: call on the chancellor to cut green taxes, red tape and benefits to bring down energy bills. Reform UK: recommends Healey adopt 60 policies, including approving the Rosebank oil field, which Healey is understood to back. Liberal Democrat Treasury spokeswoman Daisy Cooper: says the government should agree a new growth and defence partnership with the EU, including joining the single market, to ease the tax burden. Green Party leader Zack Polanski and other senior Greens: urge Healey to use the Budget to "make the UK affordable", including funding energy bill support by ending a tax relief for data centres.

What to Watch

The details of the new tax allowance and how it is designed to target low-income pensioners.
The response from opposition parties and how their alternative Budget proposals shape the political debate.
The potential impact on public finances and the broader tax and spending announcements expected in the Budget.

Sources

Healey to shield low-income pensioners from income tax in the Budget · BBC News

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12 claims in this story checked against 1 source: 10 supported.

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SupportedHealey will shield low-income pensioners from income tax in his first Budget on Wednesday.BBC News: “Pensioners on low incomes will be shielded from income tax by Chancellor John Healey in his first Budget on Wednesday.”
SupportedThe full flat-rate state pension is expected to rise by 3.9% to £13,036.40 a year from April.BBC News: “The full, flat-rate state pension is expected to increase by 3.9% to £13,036.40 a year from April.”
SupportedThat rise would take the payment above the £12,570 personal tax allowance, making it liable for income tax if no changes are made.BBC News: “This would take the payment above the £12,570 personal tax allowance and therefore be liable for income tax if no changes are made.”
Partly supportedHealey will announce a new tax allowance for low-income pensioners to ensure they are not taxed.BBC News: “Healey will explain this pledge will be met by plans for a new tax allowance for low-income pensioners.”
SupportedThe government pledged not to tax people whose only income is the state pension.BBC News: “The government had already committed to not taxing people who only get an income from the state pension.”
SupportedHealey's allies argue the plan would spare low-income pensioners the administrative burden of paying a small amount of tax.BBC News: “The chancellor's allies argue his plans for pensioners will mean they do not need to face an administrative burden just to pay a small amount of tax.”
SupportedThe Budget is due to be printed on Monday evening.BBC News: “The Budget is due to be printed this evening”
SupportedTreasury sources say the Budget will not involve the scale of tax and spending announcements seen from Labour and Conservative governments in recent years.BBC News: “Treasury sources concede it will not involve the scale of tax and spending announcements seen from Labour and Conservative governments in recent years.”
Partly supportedOpposition parties have put forward their own alternative Budget proposals.BBC News: “Healey's plans come as the Conservatives and Reform UK unveil their alternative Budget proposals, including deep cuts to the welfare bill.”
SupportedReform UK recommends 60 policies it says will create jobs.BBC News: “Reform is recommending the chancellor adopts 60 policies which they claim will create jobs”
SupportedDaisy Cooper said the EU partnership would “ease the huge tax burden weighing people down”.BBC News: “She argued this would help "ease the huge tax burden weighing people down".”
SupportedThe Green Party urged Healey to use the Budget to “make the UK affordable”.BBC News: “The Green Party has urged Healey to use his first Budget to "make the UK affordable"”