John Healey is set to shield more than a million of the poorest pensioners from income tax in the Budget

The personal allowance for the poorest pensioners is expected to climb to £13,036 — equivalent to exactly one full year of state pension. A 3.9% triple-lock increase will push the pension above the standard £12,570 threshold. Those with private pensions will remain liable for income tax. The Treasury could face a bill of up to £200 million a year by 2030.

Healey is expected to resist calls to cut the tax-free pension lump sum.

The maximum tax-free lump sum is set to stay at £268,275, not drop to £100,000.

Lib Dem Daisy Cooper accused the Conservatives and Labour of a 'stealth tax raid' on key workers.