Brits who delay taking their State Pension set to be EXCLUDED from Labour’s new tax rules and could lose £100s a year

PEOPLE who delay claiming their state pension are set to miss out on a new government tax break for poorer retirees. Last year the Government confirmed that retirees whose sole income comes from the state pension will not have to pay tax on it, although it is yet to confirm how this will work. The state pension is set to rise by more than £500 to £13,048 a year from next April. As a result, the state pension would be above the £12,570 threshold beyond which you start to pay income tax. Sign up for the Money newsletter Thank you! In the Budget the government extended the freeze on income tax thresholds for an additional three years, to April 2031. As a result, each year more retirees will be dragged over the income tax threshold. The tax break is expected to save pensioners £88 a year in 2027-28, £153 in 2028-29 and £220 in 2029-30. But the new rules will benefit just 700,000 pensioners, while 12.5 million will miss out, according to pension consultancy Lane Clarke and Peacock. Among them could be people who defer the date at which they claim the state pension, either to boost their payments or because they forgot to claim it. Currently your payments are boosted by 5.8% for every year you put off claiming your state pension. Most read in Money Meanwhile, retirees who reached the state pension age before April 2016 get a more generous 10.4%, which they also have the option to take as a lump sum with interest. It is currently understood that anyone who receives extra payments over the state pension will miss out on the tax break. Former pension minister Sir Steve Webb told This is Money: “As far as we can tell, anyone with increments on their state pension, including those for deferral, will miss out on the proposed tax waiver. “This could result in a loss of hundreds of pounds annually by the third year of the policy and makes deferring taking your state pension less attractive financially.” Retirees with a workplace or self invested personal pension will also miss out on the tax break. Meanwhile, around 7.7 million pensioners who claim the old state pension will lose out. The old state pension is worth £9,614 a year and is paid to men born before April 6, 1951 or women born before April 6, 1953. The old state pension is currently worth £9,614 a year — well below the personal allowance threshold — so retirees relying on it to survive are not even close to having to pay income tax on it. But 6.5 million people on the old state pension also receive top ups from the Government, which are known as Serps. If these payments drag their income over the personal allowance threshold then they will miss out on the tax break. This is because their income won’t have come solely from the state pension. The Sun has previously warned the changes risks creating a two tier state pension system. The department for work and pensions was approached for comment. Comment now