Rachel Reeves, in a conversation with Martin Lewis, confirmed that individuals relying solely on the state pension as their income will not be required to pay taxes. The Chancellor announced in the Budget that the state pension will see a 4.8% increase, raising the full new state pension from £230.25 to £241.30 per week (£12,547.60 annually) starting April 2026.
This adjustment places the state pension just below the £12,570 personal allowance threshold, which signifies the amount one can earn in a tax year before facing taxation. Concerns were raised by analysts that millions of pensioners depending solely on the state pension might be at risk of being taxed as it increases again in April 2027.
The state pension undergoes annual increments in line with the triple lock mechanism. Furthermore, individuals receiving only the basic or new state pension will be exempt from paying minor tax amounts through Simple Assessment, as revealed by the Chancellor.
Despite the state pension nearing the taxable threshold, Rachel Reeves assured in an interview with Martin Lewis that individuals relying solely on the state pension will remain tax-exempt during this Parliament. However, beyond the current term, no commitments have been made regarding tax obligations. Martin Lewis highlighted that from 2027, tax will be due on the full new state pension exceeding the tax-free allowance.
The Chancellor’s statement initially suggested no assessment requirements for tax, but Rachel Reeves clarified that individuals will not be taxed at all during the current parliamentary term. The operational details of this exemption were not elaborated upon at the time.
The triple lock ensures that the state pension receives an annual increase every April, aligning with the highest of earnings growth between May to July, inflation in September, or a minimum of 2.5%. With wage growth for May to July recorded at 4.8%, this figure will determine the state pension hike for April 2026.