State pension payments increase each year in line with the triple lock
The Treasury has issued a statement about tax on the state pension ahead of a major change coming in soon. The Government announced a new policy on the issue in last year’s Autumn Statement.
As the state pension increases each year in line with the triple lock, more pensioners are being dragged into paying income tax. The triple lock policy ensures payments rise each April following whichever is highest of three measures: the rise in average earnings, inflation or 2.5 per cent. After the April 2026 increase of 4.8 per cent, the full new state pension is now worth £241.30 a week, or around £12,550 a year.
This is only just below using up the entire personal allowance of £12,570, meaning from next April those on the full new state pension alone would have to pay income tax. But the Government announced at the Autumn Statement last year that it would bring in a new policy to address this.
Labour said that it would change the rules so that those on the state pension alone without increments will not have to pay income tax.
Legal changes needed
Top HMRC officials said previously that legislation would need to be brought in to enact this, and that this may come in the autumn finance bill. The Treasury was asked for an update on the forthcoming policy.
An HM Treasury spokesperson said: “Anyone whose only income is the full new or basic state pension without any increments will not pay income tax and we are committed to that over this Parliament. By keeping the triple lock, 12 million pensioners will see their income rise by up to £470 this year, and they continue to benefit from the highest personal allowance in the G7.”
The department also confirmed that work is underway on this policy and that it will set out more details about this in due course. Chancellor Rachel Reeves was asked for an update on the policy change in March.
Chancellor Rachel Reeves comment
She told the Treasury Committee: “We are working on how that will work at the moment, but we have been clear that, if your only income is from the new state pension, you will not be subject to income tax during the course of this Parliament. We will set out details later this year on how that will happen.”
Another change to the state pension worth bearing in mind is that the age when you can claim the benefit is currently increasing. The access age is moving up in stages from 66 to 67, between April 2026 and April 2028.
Legislation is also on the books for this to increase again from 67 to 68, between 2044 and 2046. To find out how much state pension you are on track to get, you can use the forecast tool on the Government website.
You typically need 35 years of National Insurance contributions to get the full new state pension. If you have gaps in your record, you may be able to pay to fill them in. You can only do this up to six tax years ago.
