HM Treasury has issued a statement regarding a significant change to the taxation of the state pension, following the announcement of a new policy by Chancellor Rachel Reeves in last year's Autumn Statement.
Triple Lock Increases Push Pensioners into Tax
The state pension rises each year in accordance with the triple lock, which guarantees payments increase each April based on the highest of three measures: average earnings growth, inflation, or 2.5 per cent. Following the April 2026 increase of 4.8 per cent, the full new state pension now stands at £241.30 per week, or approximately £12,550 annually. This amount is just below the personal allowance threshold of £12,570, meaning that from next April, individuals receiving only the full new state pension would be liable for income tax.
Government's Commitment to Exempt State Pension-Only Recipients
In response, the Government confirmed at the Autumn Statement that it would introduce a policy to address this issue. The Labour government outlined plans to alter the rules so that those whose sole income is the state pension, without any additional increments, would not be required to pay income tax.
Legislative Requirements
Senior HMRC officials have indicated that new legislation will be necessary to implement this change, potentially included in the autumn finance bill. The Treasury has been approached for an update on the progress of these changes.
An HM Treasury spokesperson stated: "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 maintaining 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."
Further Details to Come
The department confirmed that work is ongoing on this policy, with further details to be announced in due course. Chancellor Rachel Reeves was asked for an update in March during a Treasury Committee hearing. She responded: "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."
Other Changes to State Pension Age
Another notable change is the gradual increase in the state pension age. The eligibility age is rising from 66 to 67 between April 2026 and April 2028. Legislation has also been enacted for a further increase from 67 to 68 between 2044 and 2046.
Checking Your State Pension
To determine your expected state pension, you can use the forecast tool available on the Government website. Typically, 35 years of National Insurance contributions are required to qualify for the full new state pension. If there are gaps in your record, you may be able to make voluntary contributions to fill them, but this is only possible for up to six previous tax years.
