Rachel Reeves, in a conversation with Martin Lewis, affirmed that individuals relying solely on the state pension as their income would not be subject to taxation.
Confirming in the Budget, the Chancellor announced a 4.8% increase in the state pension, raising the full new state pension from £230.25 weekly to £241.30 weekly (£12,547.60 annually) by April 2026.
This adjustment places the state pension just below the £12,570 personal allowance, the threshold for tax obligations annually.
Concerns were raised by analysts that millions of pensioners dependent solely on the state pension could face taxation when the pension rises again in April 2027.
The state pension undergoes annual increments in accordance with the triple lock mechanism. The Chancellor specified that individuals solely benefiting from the basic or new state pension would be exempt from “paying small amounts of tax through Simple Assessment.”
The new full state pension closely nears the £12,570 personal allowance, nearing the taxable threshold, but individuals relying solely on the state pension will be exempt from tax, as reiterated by the Chancellor in discussion with Martin Lewis.
When questioned by Martin Lewis about tax obligations, Rachel Reeves stated, “In this Parliament, they won’t have to pay the tax. You know, further out I’m not about to make any commitments on that. But we’re looking at a simple workaround at the moment.”
Martin Lewis highlighted that starting from 2027, tax would be due on the full new state pension exceeding the tax-free allowance.
In the Budget, the Chancellor assured that individuals solely receiving the basic or new state pension would not need to “pay small amounts of tax through Simple Assessment,” although detailed operational procedures were not disclosed at that time.
The triple lock ensures that the state pension escalates annually in line with the highest growth figure between earnings from May to July, inflation in September, or 2.5%. With the highest wage growth recorded at 4.8% from May to July, this factor determines the state pension increase for April 2026.
