State pension alert: HMRC to write off 'tiny amounts of tax' as older Britons risk losing payments
Some state pensioners will not need to lose their payments to the tax man, The Telegraph reports
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State pensioners impacted by fiscal drag are set to have their tax bills written off by HM Revenue and Customs (HMRC), GB News can understand.
Former Chancellor Jeremy Hunt's decision to freeze tax allowances has placed many pensioners at risk of losing their hard-earned cash to the tax man.
This is due to fiscal drag which occurs when tax thresholds are frozen at a time when incomes are on the rise.
As a consequence of this, Britons are pulled into higher tax brackets and are forced to pay more to HMRC.
According to the tax authority, it will not send demands for payment to those who only owe "tiny" tax sums.
Some 140,000 pensioners have been pulled into paying into tax this year with this projected to jump by another 400,000 in 2025.
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Fiscal drag is causing Britons to pay more tax GETTY Notably, thanks to the triple lock, older Britons have edged closer to paying tax on their state pension alone.
Pension payments rise every year in line with either the rate of inflation, average earnings or 2.5 per cent; whichever is higher
With wages expected to be the triple lock metric in 2025, the state pension could be in touching distance of the personal savings allowance of £12,570.
Analysis from Aegon found that 5.7 per cent increase to the full new pension would raise it to £935.20 a month or £12,157.60 over the 2025/26 financial year.
This means that older households are only a couple of years away from paying tax on their state pension alone if the triple lock remains in place.
An increase of just 0.1 per cent in April 2026 would raise the annual state pension to £12,572.
Under Hunt's threshold freeze, tax allowances will remain the same until 2028 which Labour has yet to scrap.
Based on HMRC figures, more than one million Britons currently live on just the state pension and benefits. Around 1.7 million get the full new state pension.
As it stands, the state pension cannot be taxed at source under HMRC rules.
This means that anyone living solely on the full new state pension will owe tax that cannot be collected automatically.
LATEST DEVELOPMENTS:
More state pensioners are finding themselves paying tax GETTY In this situation, the tax authority would usually demand for the tax to be paid through a simple assessment letter.
Despite this rule, HMRC has confirmed that it will “not pursue hundreds of thousands of pensioners for tiny amounts of tax” if the state pension exceeds the allowance.
A Government spokesman told The Telegraph: “We will not normally issue simple assessments for tax that would cost more to collect than is owed. That would not be a good use of public funds.”
GB News has contacted HMRC for comment.
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