Rachel Reeves, in a conversation with Martin Lewis, has verified that individuals relying solely on the state pension as their income will not be subject to tax. The Chancellor, in the Budget announcement, confirmed a 4.8% increase in the state pension, boosting the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 annually) starting April 2026, just below the £12,570 personal allowance threshold for tax payment.
Concerns were raised by analysts that millions of pensioners dependent on the state pension could face tax liabilities when the pension rises again in April 2027. The state pension is adjusted annually following the triple lock mechanism. The Chancellor specified that individuals receiving only the basic or new state pension will not need to pay minimal taxes through Simple Assessment.
Rachel Reeves assured in an interview with Martin Lewis that for the current parliamentary term, individuals relying solely on the state pension will be exempt from tax obligations. However, from 2027, the full new state pension exceeding the tax-free allowance will incur tax liabilities. Further details on the tax exemption process were not provided at the time. The triple lock ensures the state pension increases yearly based on the highest of wage growth between May to July, inflation in September, or a minimum of 2.5%. Wage growth for May to July at 4.8% dictates the state pension adjustment for April 2026.
