The full new state pension is currently worth £12,547.60 a year – this puts it just below the £12,570 personal allowance
Thousands of pensioners whose only income is the state pension will not need to pay income tax, the new Government has confirmed.
The full new state pension is currently worth £12,547.60 a year. This puts it just below the £12,570 personal allowance, which is the amount you can earn every tax year before you start to pay tax.
The state pension rises every year in line with the triple lock, which guarantees it will increase every April based on inflation, wage growth or 2.5% – whichever is highest. This means the state pension will breach the personal allowance for the first time in April 2027.
But the Treasury has confirmed income tax will not be charged on people who only receive the state pension.
A 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, 12million 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.”
This backs a previous commitment by the former chancellor Rachel Reeves, who said in the Budget last year that “people only in receipt of the basic or new state pension do not have to pay small amounts of tax through Simple Assessment from April 2027”.
It was previously estimated that around 820,000 retirees would become liable for income tax on their state pension alone in 2027/28. However, pensioners with multiple forms of income will be expected to pay tax.
Prime Minister Andy Burnham is under pressure to increase the personal allowance, which has been frozen since 2021 and is set to remain at its current level until at least 2031.
Frozen tax thresholds have led to more people being dragged into paying tax for the first time, or a higher rate of tax, as their earnings increase.
Earlier this week, the new PM said there is “no commitment at this point to change” but said it could be looked at later this year in the Budget.
He had previously warned that any change would be “difficult given the financial circumstances in which we find ourselves”.
You start to pay 20% income tax when you earn above the personal allowance. The higher 40% rate applies on earnings above £50,270, while the additional 45% rate kicks in when you start to earn more than £125,140.
