Rachel Reeves, in a conversation with Martin Lewis, confirmed that individuals relying solely on the state pension as their income will be exempt from paying taxes. The Chancellor, in the Budget announcement, specified that the state pension will see a 4.8% increase, raising the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 annually) by April 2026.
This adjustment places the state pension just below the £12,570 personal allowance threshold, which marks the non-taxable earnings limit for each tax year. Analysts had previously cautioned that millions of pensioners dependent on the state pension might face tax liabilities when the pension increases in April 2027.
The state pension’s annual increment is tied to the triple lock mechanism. Additionally, the Chancellor assured that individuals receiving only the basic or new state pension would not be subject to small tax payments through Simple Assessment.
Although the new full state pension is close to the taxable threshold, Rachel Reeves assured during an interview with Martin Lewis that individuals solely reliant on the state pension would not be taxed in the current Parliament. However, beyond this term, no commitments have been made yet, pending further review for potential solutions.
Martin Lewis highlighted that starting from 2027, the full new state pension will exceed the tax-free allowance, necessitating tax payments. The Chancellor’s initial statement suggested no assessments would be required, but Rachel Reeves clarified that no taxes would be levied during the current parliamentary session.
Details on the operational aspects of this tax exemption for state pension recipients were not elaborated upon immediately. The state pension’s yearly rise, governed by the triple lock, ensures adjustments every April based on the highest figure among earnings growth between May and July, September’s inflation rate, or a minimum of 2.5%.
May to July’s wage growth, peaking at 4.8%, dictates the state pension increase for April 2026 in adherence to the triple lock policy.
