Rachel Reeves confirmed to Martin Lewis in an interview that individuals relying solely on the state pension as their income will not be taxed. The Chancellor’s Budget announcement included a 4.8% increase in the state pension, raising the full new state pension from £230.25 per week to £241.30 per week (£12,547.60 per year) starting in April 2026.
This adjustment places the state pension just under the £12,570 personal allowance threshold, which signifies the amount one can earn in a tax year before becoming subject to taxation. Concerns were raised by analysts about potential tax implications for millions of pensioners dependent solely on the state pension once it rises again in April 2027.
The state pension undergoes annual increases following the triple lock mechanism. The Chancellor also assured that individuals receiving only the basic or new state pension will not need to pay taxes through Simple Assessment.
Although the new full state pension is near the tax-free allowance threshold, Reeves confirmed in an interview with Martin Lewis that no tax payments will be required for state pension recipients during this parliamentary term. Beyond that timeframe, no commitments have been made regarding tax obligations, but efforts are underway to devise a straightforward solution.
Martin Lewis highlighted that starting in 2027, the full new state pension will exceed the tax-free allowance, necessitating tax payments. Despite initial assurances from the Chancellor, Reeves clarified during the interview that no tax will be levied in this parliament.
In the Budget announcement, it was mentioned that individuals solely receiving the basic or new state pension will be exempt from small tax payments through Simple Assessment. However, specific details on the implementation of this exemption were not provided at the time.
The state pension’s annual increase is guaranteed by the triple lock formula, which aligns the adjustment with the highest growth rate among earnings, inflation, or 2.5%. With wage growth for May to July recorded at 4.8%, this figure is being utilized for the state pension elevation in April 2026.
