Chancellor Rachel Reeves recently spoke about the tax changes
HMRC has issued a statement regarding upcoming changes to tax on the state pension. The announcement comes after Chancellor Rachel Reeves recently spoke to MPs about the policy shift.
As set out in the Autumn Budget 2025, the Government is implementing a policy to ensure state pensioners whose sole income is the state pension “do not have to pay small amounts of tax”. The full new state pension is getting very close to exhausting the £12,570 annual personal allowance.
With the 4.8 per cent increase in payments this April thanks to the triple lock, the full new rate will rise to £241.30 a week, or £12,547.60 a year. This is just over £20 short of depleting the entire personal allowance, meaning the state pension would incur an income tax liability once it exceeds this threshold.
However, ministers have now confirmed they will introduce changes to prevent those who rely solely on the state pension from paying the tax. Chancellor Rachel Reeves informed 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.” HMRC was approached for an update on the plans for the tax exemption policy.
‘We are committed’
In a joint statement from HM Treasury and HMRC, a Government 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 Treasury confirmed it will provide further details about the new tax policy “in due course”. The Treasury Committee questioned senior HMRC officials in January 2026 about how the change would be implemented.
Cerys McDonald, director of Individuals Policy at HMRC, informed the MPs that fresh legislation would need to be introduced to enact the change. She 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.”
You can find out how much state pension you’re set to receive via the Government website, using the state pension forecast tool. You generally need to have contributed 35 years of National Insurance to qualify for the full new state pension.
