Consumer advocate Martin Lewis has announced a breakthrough with Chancellor Rachel Reeves benefiting many low-income retirees following a major announcement in the Budget. Reeves confirmed that the upcoming full state pension will see a 4.8% increase next April, reaching £12,548 annually. This adjustment brings it close to the standard personal allowance of £12,570, beyond which individuals typically start paying income tax.
Previously, concerns arose that additional income might push pensioners above the tax threshold, requiring them to file tax returns. However, during an ITV show, the Chancellor assured Lewis that those reliant solely on the state pension would be exempt from income tax obligations.
Reeves stated, “If you solely receive the state pension without additional income, you will not need to file a tax return during this parliamentary term.” She further emphasized that these individuals would not incur tax liabilities and mentioned ongoing efforts to avoid pursuing minimal sums.
Lewis praised the clarification on tax matters, underscoring the importance of spreading awareness about it. Nonetheless, he criticized the government’s decision to reduce the tax-free cash ISA limit from £20,000 to £12,000 starting April 2027 for most individuals, except those aged 65 and older.
In response, Labour expressed a desire to encourage savers to invest in stock and shares ISAs to support UK-listed companies. Lewis disagreed with this approach, advocating for alternative strategies to promote investment.
Reeves highlighted that 90% of savers would remain tax-exempt on their savings, emphasizing changes in advice and guidance rules to promote investment in UK equities. Despite acknowledging the problem as identified by the Chancellor, Lewis disagreed with the proposed solution.
During a special segment of The Martin Lewis Money Show analyzing the Budget, Lewis offered advice on energy prices following the Chancellor’s announcement of measures expected to reduce average bills by £150. The reduction involves eliminating two bill add-ons, including a discredited home insulation scheme. Lewis welcomed the initiative, suggesting consumers on standard tariffs switch to fixed-rate deals promptly to maximize savings.
Regarding concerns that those on fixed deals might not benefit from the £150 saving next year, Lewis interviewed Energy Secretary Ed Miliband, who reassured that efforts were underway to ensure all consumers, including those on fixed rates, reap the benefits.