Chancellor John Healey is expected to shield around one million low-income pensioners from paying income tax in his Budget on Wednesday, 28 October 2026, according to reports published on 26 October. The move is reported as a response to a state pension rise that would otherwise push some pensioners over the income-tax threshold.

The full new state pension is expected to rise by about £489, or 3.9 per cent, to £13,036 a year from April. That figure is above the current personal allowance of £12,570, the amount most people can earn each year before paying income tax. Without a change, pensioners whose only income is the state pension could face a tax bill simply because their pension has risen.

How the reported protection would work

Under the reported plan, the tax-free allowance for low-income pensioners would rise to £13,036 to match the new full state pension, and would then rise in line with the state pension for the rest of this Parliament. Reports put the cost to the Treasury at £200 million a year by 2030.

Who would not benefit

Reports stress the limits of the measure. Pensioners with additional income, including private pensions, would still pay income tax. Older basic state pensioners who receive increments, such as Additional Pension or Second State Pension payments, are reported not to be covered by the exemption in the same way. Critics quoted in reporting have described the result as a two-tier system, while supporters argue it protects the lowest-income retirees from being dragged into tax by a pension rise.

The proposal has not yet been confirmed in the Budget itself, and the final details, including exactly who qualifies, are expected to be set out when the Chancellor speaks on 28 October.