Will low-income pensioners be protected from income tax in Budget?
Pensioners on low incomes won’t need to pay income tax on money they get from the state pension next year, according to reports.
The full new state pension is set to rise to £13,036 a year thanks to the triple lock, meaning it will breach the £12,570 tax-free personal allowance for the first time.
Under normal circumstances, this would trigger a small income tax bill.
However, as promised in the 2025 Autumn Budget, Healey will reportedly say the government will not tax pensioners who solely get the state pension if their state pension income breaches the personal allowance.
Instead, a new tax threshold for low-income pensioners will be introduced, The Times reports, meaning these pensioners would not pay tax on the £466 of full new state pension that is above the personal allowance.
Reports suggest the new allowance will increase in line with increases to the state pension until at least the end of this parliament in 2029.
Budget to target “everyday fixes”
The Budget will include a number of policies that are styled as “everyday fixes”, the government confirmed last night.
The suite of policies primarily target small cost of living fixes, like helping lower the price of groceries to provide “breathing space” for households.
Chancellor John Healey said: “Today’s everyday fixes are just a small part of what we are doing to give families a bit of breathing space. Conflict in the Middle East and Europe is hitting families here at home through higher everyday costs.
“We can’t control global events, but we can act where we can make a difference.”
Prime minister Andy Burnham added: “At Wednesday’s Budget, we’ll go further to give families and businesses the breathing space they need today, while we build a stronger economy, transform our country and bring down cost for people long-term.”
Tax-free mileage rates to be increased
Tax-free mileage rates are set to be increased in the Budget as part of a suite of policies that the government describes as “everyday fixes”.
The rates dictate how much money a firm can reimburse an employee for driving per mile without having to pay tax.
Former chancellor Rachel Reeves announced in May that mileage rates would increase from 45p to 55p for the first 10,000 miles in a tax year and 25p for miles above 10,000.
Now, new chancellor John Healey is set to increase the rate for miles above 10,000 to from 25p to 35p per mile.
The government says the move will help three million people who use their own vehicle to travel for work.
Import tariffs to be removed on over 100 products
The chancellor is set to announce that import tariffs will be axed from over 100 products at the Budget.
The move will lower the cost of staples such as baked beans, chocolate and gherkins, and other pantry staples.
Along with other tariff cuts announced in the Spring, the move is expected to save households up to £21 a year.
Carer’s Allowance cliff edge to be removed
Those who care for their loved ones will no longer lose their entire Carer’s Allowance entitlement when their earnings breach the weekly limit.
Under current rules, earning even a penny over the weekly limit of £204 will mean you become ineligible for any additional support from the government through Carer’s Allowance.
However, the chancellor is set to announce that this cliff-edge will be axed at the Budget.
Instead, the allowance will taper away by £1 for every additional £1 earned over the weekly limit.
Hello and welcome to our live coverage of the Autumn Budget.
Chancellor John Healey is due to kickstart his first Budget at around 12.30pm on Wednesday 28 October.
MoneyWeek reporters will bring you all the latest news and speak to the experts to bring you details on what the announcements mean for your finances.
You can also get involved – simply send us your pre and post Budget questions at editor@moneyweek.com and we will try and answer as many as possible via our experts.
We haven’t had many leaks from the chancellor, but here’s a recap of what we know so far:
- State pension triple lock mechanism will change in 2030 if Labour wins the next election
- A 3.9% state pension rise from April 2027 most likely to be confirmed
- VAT removed from domestic electricity bills from 1 October
- Proposals are in motion to change the Lifetime ISA in 2028, to be replaced with a new First Time Buyer ISA
- Bus fares capped at £2
- Your First Home scheme to replace Help to Buy
- Reports suggest capital gains tax will not be hiked to be in line with income tax
The chancellor has some ‘headroom’ – a cash buffer the government has to meet its fiscal rules – but inflation and increased borrowing costs amid rising gilt yields mean this may now be at £11 billion, down from £24 billion, according to the Institute for Fiscal Studies.
This will inevitably add pressure to the chancellor as he will have to find funding either through taxes or welfare cuts. This will be a Budget to watch closely.
