Money saving expert Martin Lewis expressed astonishment during a special budget breakdown with Chancellor Rachel Reeves, as she revealed a crucial detail affecting millions of state pensioners.
The Budget Clarification That Stunned Martin Lewis
During a special ITV episode of The Martin Lewis Money Show broadcast on Thursday, November 27, the financial guru sat down with the Chancellor to dissect the Autumn Budget's finer points. The discussion took a surprising turn when they addressed how Income Tax changes in 2026 would impact those relying solely on the state pension.
Reeves confirmed the Labour government's commitment to maintaining the Triple Lock, alongside a freeze on Income Tax thresholds for another three years. This combination creates a significant fiscal milestone expected in 2026.
How the 2026 Tax Threshold Will Affect Pensioners
Calculations show that the Triple Lock is projected to increase the full new state pension to £12,548 per year in 2026. This figure sits a mere £22 below the current £12,570 Personal Allowance threshold, the point at which individuals start paying Income Tax.
For the first time, the state pension alone would bring pensioners perilously close to being taxpayers. However, Rachel Reeves provided a definitive clarification that left Martin Lewis visibly stunned.
"If you are only on the new state pension, we are not going to make you fill in a tax return," the Chancellor stated unequivocally.
When Martin Lewis sought confirmation, asking "Will people not have to pay the tax?", Reeves responded: "In this parliament they won't have to pay the tax."
Important Exceptions and Future Implications
This assurance, however, comes with a critical caveat. The protection from tax and the administrative burden of tax returns only applies to pensioners with no other source of income beyond their state pension.
Pensioners who receive any additional earnings, however small, will be required to pay Income Tax on that extra money. Martin Lewis highlighted a potential consequence, noting: "It almost makes having those other earnings not worth it, but only at a very small level."
Looking further ahead to 2027, and assuming a minimum 2.5% rise under the Triple Lock, the new state pension is forecast to increase by a further £608.58 per year, which would push pensioners over the tax threshold without further government intervention.
