Overview
- Reports this week, first published on Thursday, say Treasury and DWP officials are drawing up plans to deduct income tax from State Pension payments before they reach recipients.
- The proposals under discussion include a default 20% basic-rate take at source with reconciliation after the tax year and the option to outsource administration to a private contractor.
- Ministers and the DWP have said there has been no change to the pension’s tax treatment and that no final decision has been made.
- Campaigners and tax experts warn a blunt at-source approach could over-collect money, create widespread refunds and cause real harm to vulnerable pensioners who rely on regular payments.
- The issue is driven by rising State Pensions under the triple lock and a frozen personal allowance, which HMRC data show has pushed more pensioners into tax and is likely to require primary legislation and complex new systems if pursued.