Rachel Reeves, in a conversation with Martin Lewis, has affirmed that individuals relying solely on the state pension as their income will not have to pay tax. The Chancellor’s Budget announcement confirmed 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 annually) by April 2026.
This adjustment places the state pension just below the £12,570 personal allowance, which indicates the threshold before tax liability. Concerns were raised by analysts that millions of pensioners dependent solely on the state pension might face tax obligations as the pension increases in April 2027.
Under the triple lock system, the state pension rises annually. The Chancellor disclosed that individuals solely receiving the basic or new state pension will be exempt from paying minor tax amounts through Simple Assessment.
The full state pension is nearing the tax-free allowance threshold, standing slightly below £12,570. Rachel Reeves assured in an interview with Martin Lewis that for the current parliamentary term, taxes on the state pension are not applicable. However, beyond this term, no commitments were made, but discussions on potential solutions are ongoing.
Martin Lewis highlighted that starting from 2027, the full new state pension will surpass the tax-free threshold, resulting in tax liabilities. Despite previous indications, Rachel Reeves clarified that, at least for the ongoing parliamentary term, no tax payments are required for those relying solely on the state pension.
In the Budget announcement, it was stated that individuals solely on the basic or new state pension will be spared from paying minor taxes through Simple Assessment. Detailed information on the operational aspects of this exemption was not provided at the time.
The state pension’s annual increase aligns with the triple lock mechanism, ensuring adjustments in line with the highest percentage among earnings growth between May and July, September inflation rates, or a minimum of 2.5%. The recent 4.8% wage growth from May to July determined the state pension increment for April 2026.