Chancellor Rachel Reeves provided an update about state pension changes
State pensioners could suddenly find themselves liable for a new tax bill. An MP has voiced concerns that some claimants may have “no idea” they will soon be required to complete an HMRC form to pay a tax bill.
The update follows Dr Luke Evans, MP for Bosworth, recently querying Chancellor Rachel Reeves about the issue of increasing numbers of state pensioners becoming income tax payers. After the Chancellor delivered her Spring Statement, Mr Evans queried: “I want to raise the issue of the freezing of thresholds and the effect on the state pension. When the Chancellor did it in her Budget, she told Martin Lewis that some people would be pulled into paying tax and won’t have to pay small amounts of tax and won’t have to do a tax return. The updated [OBR] forecast now says this year 600,000 pensioners will be drawn into paying tax, and going up to a one million by the end of this Parliament.
“Could she set out what the definition is of small amounts of tax and what the mechanism is she will use to make sure they don’t have to do a tax return?” This question pertains to a new policy announced in the Autumn Budget 2025.
The Government announced it would bring in reforms to ensure people “whose sole income is the basic or new state pension without any increments…do not have to pay small amounts of tax via simple assessment from 2027-28 if the new or basic state pension exceeds the personal allowance from that point”. From April 2027, the full new state pension will consume the entire £12,570 personal allowance and tip over the threshold that triggers a tax liability.
The allowance permits you to earn up to £12,570 annually tax-free, with the full new state pension currently paying £230.25 weekly, equivalent to £11,973 per year. With state pension payments climbing 4.8 per cent this April due to the triple lock, increasing numbers of people with additional income streams such as a private pension will breach the income tax threshold.
Those on the full new state pension alone also face paying income tax from April 2027. Ms Reeves responded to Dr Evans’ enquiry: “As I said after the Budget last year, if you just get the basic state pension you will not be paying tax. We will be setting out more details of that in the coming months.”
Many people do not realise
Dr Evans has now issued a renewed appeal for the Government to set out how these tax changes will work. The Conservative MP warned: “Many pensioners simply do not realise they could soon be paying tax on their state pension. For some, being dragged into filling out tax returns will come as a huge and unwelcome shock.
“The Chancellor needs to urgently explain how she plans to prevent this.” He said he has spoken with people in his Leicestershire constituency about the issue.
The MP said: “I’ve spoken to pensioners in my constituency who understand the impact of freezing the threshold, but I fear many others, including some of the most vulnerable, have no idea this is coming. Worst still, with all the policy kite flying before the Budget, many took out their pension as a lump sum to avoid a tax which never materialised.
“Rachel Reeves herself has said she does not want pensioners who rely solely on the state pension paying ‘tiny amounts of tax’ and that the Government is ‘working on a solution’. Yet that was in November – it is now March, and the Government’s own analysis shows 600,000 pensioners are on the hook. It’s time the Treasury set out exactly what that solution is, urgently.”
HMRC update on tax changes
Senior officials from HMRC were questioned by the Treasury Committee in January 2026 regarding how the proposed tax changes will work. Cerys McDonald, director of Individuals Policy at HMRC, said there are between 800,000 and a million pensioners whose sole income is the state pension.
She told the committee that new legislation would need to be introduced to effect the change. Ms McDonald said: “We would expect this to go through the next finance bill in the Autumn but we have mobilised a project team already in anticipation of having to make this change.
“The mitigation that we would normally use to recover this tax is simple assessment, normally we wouldn’t be processing that for 2027/2028 until after the 2028 tax year, so we’ve got a decent run in here.”
