Chancellor John Healey pledges in budget to protect low-income pensioners from income tax

John Healey's first budget, to be presented on Wednesday, is expected to introduce a new tax allowance for pensioners on low incomes. The basic state pension will rise by 3.9% from April to £13,036.40 a year, exceeding the tax-free threshold of £12,570. The opposition has put forward alternative proposals.

Aziz KarimovFirst published on tafs uz 26 October 2026 at 15:143 min read

The key facts

The full basic state pension will rise by 3.9% to £13,036.40 a year from April, exceeding the £12,570 tax allowance
Healey will present a plan for a new tax allowance for pensioners on low incomes, fulfilling a pledge not to tax those living solely on the state pension
The Conservatives and Reform UK have put forward alternative budget proposals, including deep cuts to social security spending

New pensioner allowance in Healey's first budget

Chancellor John Healey will present his first budget on Wednesday, in which low-income pensioners will be protected from income tax, BBC News reports. The full basic state pension is expected to rise by 3.9% to £13,036.40 a year from April. This would exceed the tax-free threshold of £12,570, and without changes the pension would become subject to income tax. The government previously committed not to tax people whose income consists solely of the state pension, and according to BBC News, Healey will explain that this commitment will be fulfilled through a new tax allowance for low-income pensioners. Supporters of the chancellor argue that such a plan would spare pensioners the administrative burden of paying a small amount of tax. The budget is due to be printed the evening before, and Healey's speech will likely be refined right up until his address at midday on Wednesday. Treasury sources acknowledge that the budget will not include the scale of tax and spending announcements typical of recent Labour and Conservative governments.

Opposition's alternative proposals

Healey's plans come against the backdrop of the publication of alternative budget proposals by the Conservative Party and Reform UK, which include deep cuts to social security spending. The Conservatives are calling on the chancellor to cut green taxes, bureaucratic restrictions and benefits in order to lower energy bills. Reform UK recommends adopting 60 policies which, it claims, would create jobs, including approval of the controversial Rosebank oil field — a project which, BBC News understands, Healey himself also supports. The Liberal Democrats offer a different direction: the party's Treasury spokesperson Daisy Cooper called on the government to conclude a new growth and defence partnership with the EU, including joining the single market, which, in her view, would help ease the huge tax burden weighing on people. The Green Party, in a letter to Healey signed by leader Zack Polanski, MPs and peers, urged the first budget to be used to make Britain affordable, including funding support for energy bills by scrapping a tax break for data centres.

Context and significance

Editorially: the announcement shows that the budget's central decision is known in advance — a pension rise above the tax-free threshold would create a tax burden on people living solely on the state pension, which would contradict the government's pledge. The new allowance is a mechanism that allows this pledge to be kept without freezing the pension itself. In practical terms, this means pensioners with income only from the state pension will face neither tax payments nor the administrative process of paying them. However, the final parameters of the allowance and the full composition of the budget will only become known after the chancellor's speech on Wednesday: the publication came a few hours before the document was printed, and Treasury sources signal a restrained scale of announcements.

John Healey walks along Downing Street with files under his arm and wearing a dark suit and a red patterned tie.

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