• [Daily Mirror Icon]
• Money
• State pension

Millions of state pensioners could have tax automatically deducted from payments

Under the plans, the basic 20% rate of tax could be applied to payments when the state pension rises over the tax-free allowance

[Stressed senior couple reviewing financial documents at home, experiencing concerns about their expenses]

View Image

The state pension is set to rise over the tax-free allowance from next year(Image: Getty)

Millions of retirees could have income tax automatically deducted from their state pension before they receive it, under new proposals reportedly being considered.

Under the plans, the basic 20% rate of tax could be applied to payments when the state pension rises over the tax-free allowance. The state pension is set to breach the tax-free allowance of 12,570 from next year.

The Telegraph reports that no decisions have been made about whether to go ahead with the policy, which were circulated as part of research commissioned by the Department for Work and Pensions (DWP).

It comes after Chancellor Rachel Reeves confirmed earlier this year that those whose only income is the state pension will not pay any income tax.

Get the best deals and tips from Mirror Money

As part of the proposals, those with no other income aside from the state pension may be eligible for a refund at the end of the tax year.

The state pension rises every April in line with the triple lock.

The triple lock guarantees the state pension increases by whichever is highest out of earnings growth in between May to July, inflation in September, or 2.5%.

The full new state pension is worth 241.30 a week (12,547.60 a year) and the old basic state pension is now 184.90 a week (9,614.80 a year).

Earlier this month, Makerfield MP Andy Burnham - who is widely tipped to become Prime Minister after Sir Keir Starmer announced he was standing down - said he would commit to keeping the state pension triple lock.

In an interview with the i Paper, Mr Burnham said that tearing up the manifesto commitment would be a very damaging thing to do.

Mr Burnham has also previously hinted that he wants to revisit the income tax personal allowance, which is currently frozen until April 2031.

The personal allowance is how much you can earn each year before you start to pay tax on your earnings.

A government spokesman told the Telegraph: There has been no change to the tax treatment of the state pension.

The Government routinely undertakes research to better understand pensioners experiences with the tax system.

The Mirror has contacted the DWP for comment.

[Daily Mirror Icon]

ENJOYED THIS STORY?

Choose Daily Mirror as a 'Preferred Source' on Google News for quick access to the news you value.