Budget 2025: Personal Allowance system explained

Rachel Reeves' Budget on 26 November will confirm the increases in state pension and other benefits due next April. However, a seemingly unrelated announcement could result in 10 million pensioners having to pay HMRC by 2030. If the Chancellor opts to extend the personal allowance threshold freeze for an additional two years, anyone receiving the full new state pension amount will likely be liable to pay income tax. The freeze was put into effect in 2021 and is set to continue until 2028.

The personal allowance threshold is the amount of income most individuals can earn each year before they become liable for income tax. At present, this stands at £12,570.

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