Rachel Reeves, during an interview with Martin Lewis, has confirmed that individuals relying solely on the state pension as their income will be exempt from paying 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 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, which signifies the threshold before tax obligations kick in each tax year. Concerns were raised by analysts that millions of pensioners depending solely on the state pension might face tax liabilities when it rises again in April 2027.
The state pension undergoes annual increments in line with the triple lock mechanism. The Chancellor also announced that individuals receiving only the basic or new state pension will not have to pay minimal tax through Simple Assessment.
Although the new full state pension is approaching the tax threshold by being slightly below the £12,570 personal allowance, Rachel Reeves assured in an interview with Martin Lewis that those with the state pension as their sole income will not be taxed during this Parliament. Beyond that, she refrained from committing to future tax implications, mentioning ongoing considerations for a straightforward resolution.
Martin Lewis highlighted that starting from 2027, the full new state pension will surpass the tax-free allowance, necessitating tax payments. He referenced Rachel Reeves’ statement that tax obligations will be waived for state pension recipients during this Parliament, indicating differing perspectives on the future tax scenario.
Further details on the tax exemption process for state pension recipients were not immediately provided. The triple lock mechanism ensures the state pension rises annually in correlation with the highest of earnings growth between May to July, September inflation rate, or 2.5%. The 4.8% wage growth recorded from May to July determined the state pension increase for April 2026.