State pension warning as 1.5 million pensioners 'liable' to pay tax on DWP retirement benefit

The host of BBC Radio 4's Moneybox highlighted data from the Department for Work and Pensions (DWP) uncovered by a Freedom of Information (FoI) request he sent.

On social media, Lewis posted: "Sunak: we will ensure the state pension is never subject to tax. Hmmm.

"The DWP told me in an FOI that 1.5 million people already have a state pension which by itself is liable to tax."

According to the money expert, this figure was applicable for May 2023 but this current tax year will likely see 2.5 million pay tax on their pension payments.

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During ITV's leadership debate last night, Prime Minster Rishi Sunak levied the accusation at opposition leader Keir Starmer.

Sunak asserted that Labour's plan would see state pensioners across the country would end up paying tax on their benefits for "the first time".

As it stands, every Briton has a personal savings allowance worth £12,750 which is the amount people can earn without paying tax.

Currently, the full new state pension comes to £11,502 annually with any retirement income over this amount being taxed.

Due to pension payments rising while tax allowances remain the same level, Britons are finding themselves pulled into higher brackets.

This means that individuals with private pension pots or from other income sources could see themselves losing money to HMRC. Chancellor Jeremy Hunt has confirmed tax-free allowances will be frozen at this level until at least 2028.

Ahead of the July 4 election, the Tories have floated raising the threshold for pensions every year in line with the triple lock in what is being referred to as the "triple lock plus".

This would ensure that older people do not pay tax on their state pension which could pensioners as polling day draws closer.

However, Labour have confirmed the party will not commit the "triple lock plus" if it returns to power next month.

Despite the Conservatives' pledging to introduce this policy, older taxpayers are already paying tax on their pensions, as HMRC's pensions guide shows.

The tax authority said: "Your pension provider will usually take off any tax you owe before they pay you.

"They’ll also take off any tax you owe on your state pension.

"If you get payments from more than one provider (for example, from a workplace pension and a personal pension), HMRC will ask one of your providers to take the tax off your state pension.

""At the end of the tax year you’ll get a P60 from your pension provider showing how much tax you’ve paid."