A growing campaign calling for the State Pension tax threshold to rise to £25,140 has prompted a formal response from HM Treasury. The proposal, backed by thousands of supporters, argues that pensioners should not pay income tax on the full new State Pension — particularly as annual increases continue under the triple lock.
With more retirees finding themselves edging closer to the income tax line, the debate has gathered momentum. But what exactly is being proposed? Why £25,140? And how has the government responded?
Here is a clear, balanced and practical breakdown of the campaign, the Treasury’s position and what it could mean for pensioners across the UK.
What Is the £25,140 Proposal
The campaign suggests raising the income tax Personal Allowance for pensioners — or aligning it with the full annual State Pension amount — so that no one relying solely on their State Pension would face an income tax bill.
Currently, the Personal Allowance stands at £12,570. The full new State Pension is set annually and has increased significantly in recent years due to the triple lock guarantee.
Campaigners argue that if the State Pension continues to rise, the tax threshold should rise alongside it, ensuring pensioners are not taxed on what many view as a foundational retirement income.
The £25,140 figure reflects a proposed doubling of the existing Personal Allowance, creating a significantly higher tax‑free income band.
Why the Campaign Is Growing
Several factors have contributed to growing support:
Triple lock increases pushing pensions closer to the tax threshold
Frozen Personal Allowance since 2021
Rising living costs affecting fixed‑income households
Concerns about “fiscal drag”
Fiscal drag occurs when tax thresholds remain frozen while incomes increase, pulling more people into paying tax without changing headline tax rates.
For pensioners whose income consists mainly of State Pension plus small private pensions, this can mean gradually increasing tax exposure.
The Treasury’s Response
In response to questions about the £25,140 threshold proposal, HM Treasury has reiterated that tax policy must balance fairness with sustainability.
Officials have emphasised:
The Personal Allowance applies equally to working‑age people and pensioners
Income tax funds essential public services
Large increases to the threshold would significantly reduce government revenue
While acknowledging concerns about fiscal drag, the Treasury has not committed to raising the allowance to £25,140.
Instead, it maintains that any changes to tax thresholds are considered within the broader Budget process.
How the Current Tax System Works for Pensioners
The Personal Allowance of £12,570 applies to most taxpayers.
If total income exceeds that amount, income tax is charged at:
20% on basic‑rate income
40% on higher‑rate income
45% on additional‑rate income
The State Pension is taxable, but tax is not deducted at source. Instead, if your total income exceeds the Personal Allowance, tax is typically collected through PAYE adjustments on private pensions or employment income.
For pensioners receiving only the State Pension and no additional income, tax is often not payable if total income remains below the allowance.
Why Some Pensioners Are Now Paying Tax
In recent years, the triple lock has increased State Pension payments by the highest of:
Earnings growth
Inflation
2.5%
As a result, the annual value of the State Pension has risen steadily.
Meanwhile, the Personal Allowance has remained frozen.
This combination means more pensioners with modest additional income are becoming liable for income tax.
Even small private pensions can push total income above the threshold.
What Would a £25,140 Threshold Mean
If the Personal Allowance were raised to £25,140:
Pensioners earning below that figure would pay no income tax
Many basic‑rate taxpayers would see reduced tax bills
Lower‑income retirees would keep more of their income
For example, a pensioner with total income of £18,000 would currently pay tax on £5,430. Under a £25,140 allowance, they would pay no income tax at all.
The financial difference could be significant.
Cost to Public Finances
A rise to £25,140 would represent a dramatic increase in the tax‑free threshold.
Such a move would reduce income tax receipts by billions of pounds annually.
The Treasury argues that this revenue funds:
Healthcare
Education
Infrastructure
Social care
Any reduction would require either higher borrowing, alternative tax increases or spending cuts.
This is the core tension in the debate.
Impact on Working‑Age Taxpayers
One key question is whether a higher allowance would apply only to pensioners or to all taxpayers.
If limited to pensioners, it could create differences between age groups.
If applied universally, the fiscal cost would be even larger.
Currently, the Personal Allowance is not age‑specific.
Any structural change would require careful legislative design.
Interaction With Pension Credit
Lower‑income pensioners may qualify for Pension Credit.
Raising the tax threshold would not directly affect Pension Credit eligibility, as it is means‑tested based on income levels.
However, higher take‑home income could reduce reliance on means‑tested benefits for some households.
Political and Public Debate
The £25,140 campaign reflects broader questions about fairness.
Supporters argue:
The State Pension should not be taxed
Older people have already contributed through National Insurance
Rising costs justify higher tax‑free income
Critics argue:
Income tax is based on total income, not source
Large threshold increases are fiscally expensive
Targeted support may be more effective
The issue is likely to remain politically sensitive.
Is Any Change Confirmed
At present, there is no confirmed policy raising the Personal Allowance to £25,140.
The Treasury’s response indicates that while concerns are acknowledged, no commitment has been made.
Any change would need to be announced formally in a Budget and passed through Parliament.
Until then, the current threshold remains in place.
What Pensioners Should Do Now
If you are concerned about tax liability:
Check your total annual income
Review your tax code
Use official tax calculators
Seek clarification from HM Revenue and Customs if needed
Understanding your income position helps avoid surprises.
Could Smaller Changes Happen Instead
Rather than doubling the allowance, the government could:
Gradually increase the threshold
Adjust tax bands
Introduce targeted pensioner relief
Modify the triple lock formula
Incremental changes are often more likely than sweeping reforms.
Common Questions
Is the £25,140 threshold approved
No, it remains a campaign proposal.
Will pensioners stop paying tax
Not under current law.
Is the State Pension taxable
Yes, it is taxable income.
Could the Personal Allowance rise in the future
Yes, but changes require formal Budget announcements.
Key Points to Remember
The current Personal Allowance is £12,570.
The £25,140 proposal is not law.
The Treasury has acknowledged but not adopted the campaign.
The State Pension is taxable if total income exceeds the threshold.
Any change would require legislation.
Final Thoughts
The campaign to raise the State Pension tax threshold to £25,140 reflects genuine concern among pensioners facing rising costs and frozen tax allowances.
While the Treasury has responded by emphasising fiscal balance, the debate highlights the broader challenge of funding retirement fairly in an ageing society.
For now, pensioners should plan based on existing tax rules.
Keeping track of income, understanding tax codes and staying informed about Budget announcements remain the best steps.
Whether or not the £25,140 proposal gains further traction, it has already succeeded in drawing attention to an important issue: how tax policy interacts with retirement income in modern Britain.
As with all major fiscal debates, clarity will ultimately come through formal government announcements — not speculation.
Until then, the current threshold stands, and careful financial planning remains key.