Healey’s ‘bizarre’ pension tax shield to hit thousands of retirees with 53 per cent tax rate

Hundreds of thousands of low-income pensioners are set to pay an effective 53 per cent tax rate on part of their retirement income, under new rules introduced by John Healey in his maiden Budget. The Chancellor confirmed he will shield low-income pensioners from income tax as the state pension is set to rise above the personal allowance threshold from April 2027. The full state benefit will rise by £489 to £13,036, pushing those who rely solely on the benefit above the £12,570 threshold. Healey hiked the threshold to the new amount to ensure the UK’s poorest retirees do not pay income tax. But for those who earn just above this income level, the tax rate will be reduced by £1 for every £3 of income above the threshold. The mechanism acts as a benefit taper, similar to the 60 per cent tax rate, as extra income causes the temporary relief to be wiped away. For pensioners on £13,319 or above, the tax break will therefore be reduced to zero. Buckling other low earners Whi